Monday, February 21, 2022

Coffee clash: "up to" on label plausibly misleading where instructions would produce only 70-80% of that

In Re Folgers Coffee, Marketing Litig., No. 21-2984-MD-W-BP, 2021 WL 7004991 (W.D. Mo. Dec. 28, 2021)

Each canister of Folgers coffee includes a similar label that appears prominently on its front and indicates that the coffee grounds in the canister “MAKES UP TO” a certain quantity of “FL OZ CUPS” of coffee. On the back, Folgers provides instructions on how to brew its coffee, telling consumers to use one tablespoon of ground coffee to make one serving—which means a 6 fl. oz. cup—of coffee. However, consumers cannot make the quantity of cups advertised on the label if they use one tablespoon per cup.

For example, a 30.5 oz. cannister of Folgers Classic Roast advertises that it makes up to 240 cups of coffee, which, according to the instructions, requires 240 tablespoons, or 1200 grams of ground coffee. But the 30.5 oz. cannister contains only 865 grams of ground coffee, meaning that if a consumer followed the instructions on the back of the cannister, she could make only 70% of the number of cups advertised on the Label.

Plaintiffs sued for false advertising; the cases have been consolidated here. The court finds that plaintiffs plausibly pled misleadingness, though there are details for each relevant state law.

Defendants moved to strike allegations related to the putative nationwide class for plaintiffs’ negligent misrepresentation, fraud, and unjust enrichment claims. “But while there are no doubt many differences among these bodies of law, at this juncture, the Court lacks the information necessary to determine with certainty that the certification of a nationwide class is impossible.” Also, the court would not hold that it lacked personal jurisdiction over absent class members from states from which there were no named plaintiffs; absent class members are not “parties” in the same sense that members of a mass tort action are.

However, plaintiffs couldn’t recover punitive damages under California or Missouri law because plaintiffs didn’t plead the requisite knowledge/evil motive.

Defendants argued that plaintiffs had to find a purchaser of each of the 42 separate Folgers products using the allegedly misleading label. But this standing question would be “more efficiently resolved at the class certification stage by limiting the class definition,” at which point the court would resolve whether substantial similarity in the product misrepresentation would suffice for class treatment.

Plaintiffs are plausibly suffering some ongoing harm—they continue to desire to buy Folgers but can’t rely on the labels—and so they had standing to seek injunctive relief.

Defendants argued that the instructions weren’t plausibly misleading. They provide that, “[f]or best brewing results,” consumers should use one tablespoon of coffee to produce one 6-oz serving of coffee, or 1//2 of a measuring cup to produce ten 6-oz servings. Like the front labels, the instructions provide that each canister “makes up to” a certain number of “suggested strength 6 fl oz servings.”

Defendants argued that plaintiffs couldn’t plead deception if they didn’t try to scoop out every grain of ground coffee to see how many servings they could make. The court was appropriately dismissive of this argument: they’re allowed to use math to show that it would be impossible to brew that many cups at that recommended strength with that measurement method.

Next, defendants argued, the instructions also allowed for a “Pot Method,” not just a single-serving method; the Pot Method requires half a measuring cup (8 tablespoons) to brew ten servings. “The problem with this argument, as Plaintiffs point out, is that most Folgers products contain only about 70% of the tablespoons of grounds necessary to brew the listed number of cups using the Single-Serving Method, so even if a consumer used exclusively the Pot Method, she still could not brew the listed number of cups.” That is, the Pot Method would still only get them to around 80% of the advertised label numbers.

Finally, defendants argued that the label’s “up to” claim could not mislead a reasonable person to conclude that the contents of the cannister are guaranteed to make the listed number of cups. Comment: But nor would a reasonable person think that there was a guarantee that the contents would not make the listed number of cups if brewed as directed.

“Multiple courts discussing similar language have concluded that if a seller represents that a good produces ‘up to’ a certain quantity of something, and there is a significant disparity between that quantity and the amount a consumer can actually produce, ‘a fact question is presented as to whether a reasonable consumer’ would be deceived.” A prior similar case concluded otherwise, reasoning that “up to” was a promise that the canister could make those amounts “under certain circumstances.” But the complaint alleged a “huge disparity” between the amount produced by following the instructions and the amount indicated on the labels. “So while it might not be reasonable for a consumer to expect to always brew the exact quantity of coffee advertised on the Labels, a consumer might reasonably expect to brew close to that number at least some of the time, especially if she exclusively used the more efficient Pot Method.” On the allegations of the complaint, it was impossible to do so.

A bunch of more specific holdings follow:

The Missouri Merchandising Practices Act provides a cause of action against any person who makes a “misrepresentation ... or omission of any material fact in connection with the sale or advertisement of any merchandise in trade or commerce.” For a plaintiff to recover, she must show that she “suffered [ascertainable] pecuniary loss.” She has suffered an ascertainable pecuniary loss if there is a “difference between the actual value of the property and what its value would have been if it had been as represented.” This was sufficiently pled; the amount of the loss didn’t need quantification at this stage. Likewise, materiality was plausible: a reasonable consumer would plausibly consider how much she’d receive to be important in deciding to buy.

Usual California statutory claims: Similar.

NY: Personal jurisdiction arguments not reconsidered from earlier proceedings.

District of Columbia Consumer Protection Procedures Act: Like the old California regime, the CPPA enables private individuals to act as “private attorney[s] general” in enforcing consumer protection laws. “The result is that a consumer can obtain damages and injunctive relief on behalf of the population of D.C. without (1) representing a class or (2) alleging an ongoing injury.” But he still needed to show a risk of future harm to have standing for injunctive relief, and he didn’t.

The Florida Deceptive and Unfair Trade Practices Act: FDUPTA has three elements: (1) a deceptive act or unfair practice; (2) causation and (3) actual damages. Same result as for Missouri/California.

The Illinois Consumer Fraud and Deceptive Business Practices Act and Uniform Deceptive Trade Practices Act: ICFA requires “actual pecuniary loss,” analyzed as above. IDTPA provides for only injunctive relief, so plaintiffs couldn’t obtain damages, attorney fees, or disgorgement thereunder, though injunctive relief was available based on ongoing inability to trust the label.

The Washington Consumer Protection Act requires: (1) an unfair or deceptive act or practice; (2) occurring in trade or commerce; (3) public interest impact; (4) injury to plaintiff in his or her business or property; (5) causation. A deceptive trade practice has public interest impact “when (1) it is part of a pattern or generalized course of conduct, and (2) there is a real and substantial potential for repetition of defendant’s conduct after the act involving plaintiff. This claim survived.

Common law breach of express warranty under the laws of named plaintiffs’ respective states: The number of cups was plausibly an express warranty. Defendants argued that plaintiffs failed to satisfy various states’ pre-suit notice requirements. Florida requires that before filing suit, a buyer “must within a reasonable time after he or she discovers or should have discovered any breach notify the seller of the breach.” However, Florida district courts have generally held that “seller” does not include “manufacturer” under this statute, and hence, that the notice requirement does not apply to manufacturers. Washingon had similar wording, but there appeared to be no state authority on whether Washington defines “seller” broadly or narrowly; the court thus followed other courts which have applied the Florida approach.

What about Texas and Illinois, which do require pre-suit notice? Plaintiffs did send letters to defendants, but none of the letters came from plaintiffs who bought goods in Texas or Illinois, and thus they didn’t raise claims under Texas or Illinois law. “Further, under both Texas and Illinois law, initiation of a lawsuit is not an adequate notice of a breach of warranty claim, and express warranty plaintiffs are required to provide notice to upstream manufacturers.” So those claims were dismissed.

Implied warranty of merchantability: Defendants argued that California requires “privity of contract” between a manufacturer and buyer to maintain such a claim, and all plaintiffs purchased their coffee canisters through a retail intermediary. But California recognizes an exception to this rule where “the plaintiff relies on written labels or advertisements of a manufacturer,” and thus is a third-party beneficiary. 534 F.3d 1017, 1023 (9th Cir. 2008) (citing Burr v. Sherwin Williams Co., 268 P.2d 1041 (Cal. 1954)). Texas claims failed for want of pre-suit notice.

Common law claims for fraudulent and negligent misrepresentation: All of the states at issue in this MDL “rely, at least to some extent, on the Restatement (Second) of Torts in defining misrepresentation claims.” The Restatement states: “One who fraudulently makes a misrepresentation ... for the purpose of inducing another to act ... is subject to liability to the other in deceit for pecuniary loss caused to him by his justifiable reliance upon the misrepresentation” and: “One who, in the course of his business, profession, or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance ... if he fails to exercise reasonable care or competence in obtaining or communicating the information.”

The primary differences are that “fraudulent misrepresentation requires proof that the defendant knew the statement was untrue or was reckless as to whether the statement was true or false, while negligent misrepresentation only requires that the defendant failed to exercise reasonable care or competence to obtain or communicate true information,” and negligent misrepresentation requires that some sort of “special relationship between the parties” exist, although the nature of that relationship varies from state to state.

The complaint explicitly alleged that defendants “knew or should have known that each of the Products falsely and deceptively overstates the number of servings of coffee that can be made.” And “knowledge[ ] and other conditions of a person’s mind may be alleged generally” in a fraud case. From the complaint, it was reasonable to infer that there were two alternatives: “either Defendants tested the number of cups it is possible to make from each cannister, or they did not. If the former is true, Defendants had actual knowledge that the Labels were false; in the latter case, Defendants had no basis whatsoever for making the representations.”

What about the “special relationship” part of negligent misrepresentation theory? This was required in NY and California, meaning something beyond “mere receipt of an advertisment.” Illinois imposes a comparable requirement that the defendant be “in the business of supplying information,” and Illinois courts have held that “manufacturers of tangible noninformational goods” (like coffee) are not in the business of supplying information. So those state claims were dismissed. However, the remaining states—Florida, Missouri, Washington, and Texas—didn’t impose a special relationship requirement for negligent misrepresentation claims.

Nor were remaining misrepresentation claims under California, Missouri, and Texas law barred by the economic loss doctrine.

Unjust enrichment claims also survived, because it was too early to determine whether they were merely duplicative of other remedies.

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