Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Cal.: Class action suit over antioxidant representations partially dismissed against Honest Tea, Inc., (Jun 11, 2014)

By Greg Hammond, J.D.

A class action suit alleging that Honest Tea, Inc. engaged in dishonest advertising and violated California’s consumer protection laws was partially dismissed. The federal district court in Sacramento, California determined that some of the consumer’s claims were preempted by the Federal Food, Drug, and Cosmetic Act (FDCA) or were based on non-actionable puffery (Salazar v Honest Tea, Inc., June 9, 2014, Mueller, K).

Background. Sarah A. Salazar was a regular purchaser of Honest Tea, Inc.’s Honey Green Tea between 2012 and 2013. However, she filed a putative class action, alleging that Honest Tea was dishonest in its advertisements and labeling regarding the antioxidants contained in their products. Specifically, Salazar argued that independent testing dispelled Honest Tea’s label representations: “250 mg EGCG Super Antioxidant;” “Antioxidants 190 mg Tea Catechins/Bottle;” and “247 mg Antioxidants Green Tea Flavanoids Per Bottle.” She claimed that Honest Tea violated California’s Consumers Legal Remedies Act (CLRA), Unfair Competition law (UCL), and False Advertising Law (FAL). In addition, Salazar set forth claims for breach of warranty, negligent misrepresentation, and fraud.

Honest Tea filed a motion to dismiss Salazar’s complaint, arguing: (1) her claims are expressly preempted by the FDCA; (2) she failed to plead reliance and injury; (3) her claims are based on non-actionable puffery; and (4) her implied warranty claims should be dismissed because no facts were alleged demonstrating Honey Green Tea was not merchantable or fit for use as a bottled tea.

Preemption. The court granted Honest Tea’s motion to dismiss Salazar’s state law claims without prejudice and only as they related to the antioxidant level of Honey Green Tea. It determined that the challenged statements were directly about the level of antioxidant nutrients in Honest Tea’s product, which is an example of an express nutrient content claim within the FDA’s jurisdiction. Consequently, the nutrient content claims were required to be challenged under the 12-sample test method. However, because Salazar failed to show that the statements on the product labels violated the FDCA’s labeling requirements, the court concluded that the state law claims were preempted. Nevertheless, the court granted Salazar leave to amend her complaint, as additional facts and arguments within the complaint could allow Salazar to state a claim that is not preempted. In addition, court dismissed Salazar’s implied warranty claims as moot, with leave to amend.

Reliance and injury. Honest Tea also argued that Salazar did not have standing under California’s consumer protection laws because she did not allege sufficient injury. In addition, the company argued that her fraud, negligent misrepresentation, and breach of express warranty claims failed because she did not plead reliance. However, the court concluded that Salazar had standing under the UCL, FAL, and CLRA, because she sufficiently alleged injury in fact and loss of money as a result. In addition, the court determined that Salazar sufficiently satisfied the heightened pleading requirements of FRCP Rule 9(b), as she identified the specific misleading statements; the basis for the misleading contention; where the statements appear on the packaging; and the time period when the statements were used. As such, Honest Tea’s motion to dismiss under Rule 9(b) was denied.

Puffery. The court next considered whether the claims based on the “Honest Tea” name; “Refreshingly Honest” and “Brutally Honest” taglines; and “just a tad sweet” and “a kiss of honey, but not enough to gross you out” statements should be dismissed as non-actionable puffery. It determined that the honey-related statements were vague and non-specific terms that failed to specify an indication of their levels, and were thus dismissed as puffery. However, the honesty-related claims were not found to be puffery. The court found that because Honest Tea paints itself as honest and created its product image around that characteristic, the “honest” advertising could imply that the company provides only truthful information that consumers might rely on. Consequently, the motion to dismiss with regard to the honesty-related statements was denied.

The case number is 2:13-cv-02318-KJM-EFB.

Attorneys: Annick Marie Persinger (Bursor & Fisher, PA) for Sarah A. Salazar. Steven A. Zalesin, PHV (Patterson Belknap Webb & Tyler LLP), and Tammy Beth Webb (Shook, Hardy & Bacon, LLP) for Honest Tea, Inc.

Companies: Honest Tea, Inc.

Cases: Advertising ConsumerProtection StateUnfairTradePractices CaliforniaNews