"pure" chocolate may be deceptive if it has too much heavy metal

In re Theos Dark Chocolate Litigation, 2024 WL 4336631, No. 23-cv-02739-HSG, --- F.Supp.3d ---- (N.D. Cal. Sept. 27, 2024)

Plaintiffs alleged that Theo’s dark chocolate bars contained, or risked containing, the heavy metals cadmium, lead, and arsenic at levels exceeding California’s then-governing Maximum Allowable Daily Level, as revealed by Consumer Reports in December 2022 and subsequently confirmed by plaintiffs’ independent testing. These heavy metals allegedly cause “harmful effects, particularly in children,” putting children at risk for lowered IQ, behavioral problems (such as attention deficit hyperactivity disorder), type 2 diabetes, and adults face an increased risk of “cancer, cognitive reproductive problems, and other adverse conditions” from just a “modest amount” of exposure. Plaintiffs alleged that because “[i]t is possible to reduce or even eliminate toxic heavy metals in the Products,” “Theo could have implemented changes to its business and manufacturing practices to control and eliminate the heavy metals in the Products it sold to Plaintiffs and the public,” but that it has failed to do so. Certain products’ outside labels promote the product as “pure,” which was allegedly deceptive because it “suggest[s] the absence of adulterants in the Products.” Plaintiffs also argued that the heavy metals were deceptively omitted from the ingredient list. And some plaintiffs allegedly relied on the inside of the wrapper, which stated that Theo “pay[s] higher prices for quality cacao beans,” that the products are “from farm to bar to you,” and that they are “organic chocolate you can feel good about” eating.

Plaintiffs sued for violations of Washington’s Unfair Business Practices and Consumer Protection Act, the usual California statutes, the New Jersey Consumer Fraud Act, and common law negligent misrepresentation, unjust enrichment, breach of implied warranty of merchantability, and breach of express warranties.

Article III standing was present because of the alleged price premium paid. Standing for injunctive relief was present because of the alleged inability to rely on the advertising/labeling in the future despite plaintiffs’ desire to purchase Theo dark chocolate bars if the claims suggesting the absence of heavy metals were true, given that they explicitly allege that “[i]t is possible to reduce or even eliminate toxic heavy metals in the Products,” and discuss various ways that reduction and elimination may be accomplished. This was made even more plausible by the allegation that “competing dark chocolate producers are able to manufacture products” with lower levels of heavy metals.

Theo also argued that plaintiffs couldn’t bring claims on behalf of nationwide class under the laws of 48 other states, but plaintiffs argued that their nationwide claims were based on the law of Theo’s home state, Washington, so that was ok for now.

Nor did the doctrine of primary jurisdiction bar the claims. “This case is far less about the science of food safety than it is about whether a product label is misleading. Plaintiffs present a deceptive labeling case well within this Court’s domain, as ‘this is not a technical area in which the FDA has greater technical expertise than the courts – every day courts decide whether conduct is misleading.’” Furthermore, “[t]he Court has no reason to believe that the FDA is currently conducting a binding investigation or rulemaking process regarding heavy metals in dark chocolate that will conclude soon, and therefore sees no reason to defer to the FDA’s jurisdiction on the matter.”

Nor did a consent judgment entered into under California’s Proposition 65 with several chocolate manufacturers bar the claims. This was not a claim of failure to warn under Proposition 65, but an independent false advertising claim.

Statutory consumer protection claims survived; all three states use the reasonable consumer standard. The theory of deception here involved both affirmative misrepresentations and omissions. Any claims based on statements on Theo’s website failed because plaintiffs didn’t plead reliance on those alleged misrepresentations.

So, the relevant representations included the descriptor “Pure” on the outside label, and the statements on the inside label that the products are “from farm to bar to you,” contain “quality cacao beans,” and are “organic chocolate you can feel good about” eating. Theo argued that “pure”/ “purity” was just a product descriptor and differentiated products containing added ingredients such as fruit and nuts from bars compromised solely of dark chocolate, not communicate an absence of heavy metals. And it argued that the other statements were just puffery.

The court agreed that “Farm to bar to you” and “chocolate you can feel good about” were nonactionable puffery, as reasonable consumers would not rely on these aspirational statements as reliable promises about the cacao bean’s journey from seed to shelf or how a consumer might feel about their chocolate. But “pay[s] higher prices for quality cacao beans,” was a factual assertion that Theo was selective about its cacao beans and chose to invest in a superior raw product; it didn’t understand Theo to have challenged “pure” as puffery (rather than just as having a different factual meaning); and “quality cacao bean” could plausibly mislead consumers about heavy metal content. A reasonable consumer could conceivably understand these statements to suggest the absence of contaminants like heavy metals. The court expressed its doubts that plaintiffs would be able to prove this—but that’s not a question for the motion to dismiss stage.

However, the omission of warnings about heavy metal content wasn’t actionable. To plausibly allege a fraudulent omission, the omission must either (1) “be contrary to a representation actually made by the defendant,” or (2) “an omission of a fact the defendant was obliged to disclose.” “[A] defendant only has a duty to disclose when either (1) the defect at issue relates to an unreasonable safety hazard or (2) the defect is material, ‘central to the product’s function,’ and the plaintiff alleges one of four situations established by California law.  As to safety, plaintiffs argued that no amount of lead is safe and that even low levels of cadmium and “long-term ingestion of even small amounts of arsenic” (in its inorganic form) can cause health concerns. But they didn’t plead that the amounts of heavy metals that occur in Theo’s products have caused harm or create an unreasonable safety hazard; they didn’t show that the levels exceeded the limits imposed by California’s new limits under the consent judgment mentioned above.

Under the second theory, plaintiffs alleged that the levels of lead or cadmium in the Products affect the central functionality of the products because “[t]he central function of food, even in the form of chocolate, is to provide nutrition and this is contradicted by the presence of heavy metals,” which plaintiffs allege are unsafe even in trace amounts. But they didn’t plausibly plead that chocolate containing trace amounts of heavy metals ceases to function as food – or ceases to provide any nutritional value. So the omission theory failed.

Negligent misrepresentation and unjust enrichment claims survived (for now); breach of implied warranty claims failed because plaintiffs didn’t plead the products were unfit for use as food; but express warranty claims survived because of the affirmative misrepresentation theory above.

UCL unlawful claim: Theo argued that it wasn’t “required to list the possible presence of heavy metals as separate ingredients in the Products’ ingredients lists” and need not disclose “incidental additives.” The FDA exempts manufacturers from the obligation to disclose “[i]ncidental additives that are present in a food at insignificant levels and do not have any technical or functional effect in that food.” “Incidental additives” include “[s]ubstances migrating to food from equipment or packaging or otherwise affecting food” provided they are “not food additives,” or, if they are food additives, “are used in conformity with regulations established pursuant to [the Federal Food, Drug, and Cosmetic Act (FDCA)].”

But plaintiffs alleged that the levels are significant—both to consumers and in numerical quantity. This was a factual question that couldn’t be resolved at this stage.

Nor was the issue expressly preempted by the FDCA. Plaintiffs brought their unlawful misbranding claim under California’s Sherman Law, “which expressly adopts federal labeling requirements in their entirety and without modification.” But Theo argued that heavy metals are not “ingredients” or “incidental additives” at all and are thereby exempt from federal labeling disclosure requirements, which would make plaintiffs’ theory non-identical to federal law. The court rejected that argument:

While Defendant may disagree with Plaintiffs as to the meaning of the FDA requirements at issue and whether its products conform to those requirements, that disagreement does not mean that Plaintiffs are trying to impose additional requirements. Moreover, according to Plaintiffs’ allegations, Heavy Metals “get into cacao after beans are harvested,” during “post-harvest processing,” and when the beans are cleaned at factories. Therefore, as alleged, the Heavy Metals are plausibly incidental additives, potentially subject to disclosure under FDA regulations.

At this stage, the court also declined to dismiss plaintiffs’ claims for equitable remedies; they alleged that the available legal remedies are inadequate, especially for prospective harms.