Antitrust Law Daily Wrap Up, ADVERTISING—E.D. Cal.: Lack of reliance argument weak in tea mislabeling case, (Nov 17, 2015)

By Edward L. Puzzo, J.D.

A putative class action against a tea company, based on misleading labeling statements concerning antioxidants, could not be dismissed on the grounds that the plaintiff’s testimony showed she could not prove necessary reliance, the federal district court in Sacramento, California has ruled (Salazar v. Honest Tea, Inc., November 12, 2015, Mueller, K.).

Sarah Salazar, on behalf of a putative class, alleged that the labeling on Honest Tea, Inc.’s Honey Green Tea product violated California’s Consumers Legal Remedies Act (CLRA), Unfair Competition Law (UCL) and False Advertising Law (FAL). She alleged that labeling statements indicating that the product contained epigallocatechin gallate (EGCG), “the most potent antioxidant around” and “one of many tea antioxidants,” violated FDA labeling requirements, adopted by California, that prohibited nutrient content claims on food labels unless the FDA had established Reference Daily Intakes (RDIs) for that content. After discovery, Honest Tea moved to dismiss, alleging that Salazar’s deposition testimony showed that she could not prove reliance.

Reliance required. Because the alleged misconduct in this action involved false advertising and misrepresentation, the court stated, the plaintiff must establish actual reliance to establish standing for her UCL and FAL claims, and must establish reliance for standing for her CLRA claim. Under all three statutes, reliance required a showing that the defendant’s misrepresentation was an immediate cause of the injury. This did not require that the misrepresentation be the sole or predominant factor influencing plaintiff’s conduct, but it must be a substantial factor.

Reliance challenged. Honest Tea first alleged that reliance was lacking because Salazar admitted she did not purchase Honey Green Tea with the 2008 label containing the labeling statements in question. The court responded that questions concerning any material differences between the labels in 2008 and those in the 2012-2013 time period in plaintiff’s complaint should be addressed at the class certification stage and not at this stage.

Honest Tea next alleged that reliance was lacking because, despite her allegation that she would not have purchased the product had she known that the label did not contain only truthful information, Salazar admitted that the statements on the label were, in fact, true through her admission that the tea did contain the antioxidant EGCG and that antioxidants have the potential to defend against free radicals. The court noted, however, that a statement could mislead consumers even if it were not factually untrue. Salazar’s statements were consistent with her allegation that she had spent more money to purchase Honest Tea because she had been deceptively led to believe that the tea was the best source of antioxidants when, in fact, it was not.

Finally, Honest Tea alleged that reliance was lacking because, despite her allegation that the labeling violated FDA regulations, Salazar admitted she was unfamiliar with the relevant FDA regulations at the time she purchased the tea. The court stated that district courts generally agree that a plaintiff cannot circumvent the reliance requirement by arguing that statements are per se misleading if the statements violate a technical FDA regulation. But courts also do not require the consumer to have been familiar with FDA regulations in order to prove reliance. Instead, plaintiffs are merely required to show how the alleged misbranding misled the plaintiff in a way that a reasonable consumer would also be misled.

In her complaint, Salazar alleged that the labeling statements mislead consumers into believing that tea contains nutrients recommended for daily diets, and that antioxidant EGCG was very important. The court concluded that Salazar’s allegations did demonstrate how a reasonable consumer would be deceived by the antioxidant statements, regardless of whether the statements technically violated FDA requirements.

Thus, the court declined to dismiss plaintiff’s complaint on the grounds that her testimony was inconsistent with her allegations of reliance.

The case is Civil Action No. 2:13-cv-02318-KJM-EFB.

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

Companies: Honest Tea, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews