Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Claims proceed against Starbucks over underfilled lattes, (Jun 21, 2016)

By Jeffrey May, J.D.

California consumers can proceed with claims that Starbucks cheated customers by providing less fluid ounces in their lattes than the company represented in violation of California’s Consumers Legal Remedies Act (CLRA), Unfair Competition Law (UCL), and False Advertising Law (FAL), the federal district court in San Francisco has ruled (Strumlauf v. Starbucks Corp., June 17, 2016, Henderson, T).

Standing. The plaintiffs alleged that they purchased "Grande" sized lattes from Starbucks, but would not have purchased those drinks "on the same terms" if they "had known that they were not, in fact, 16 fluid ounces." Even if the complaining customers did not measure their own lattes and find them lacking, they sufficiently alleged Article III standing to pursue damages claims under the CLRA, UCL, and FAL. However, they did not have standing to seek injunctive relief.

There were three theories of underfilling offered that were sufficient to establish standing to seek damages, according to the court. Those three theories were: (1) milk foam, which makes up the top layer of the latte, is improperly counted toward the total volume of the latte, when the industry standard is to let the foam dissipate or to measure the drink without the foam; (2) lattes at all Starbucks locations are created using pitchers that have "fill to" lines that are too low for the finished product to conform to the defendant’s fluid ounce representations; and (3) baristas are instructed to "leav[e] at least 1/4 [inch] of space below the rim of the serving cup," even though the serving cup’s capacity is exactly the amount which defendant represents on the menu.

According to the court, the allegations allow for the reasonable inference that: "If all Starbucks lattes are made pursuant to a standardized recipe which results in the lattes being uniformly underfilled, and the plaintiffs allege that they purchased lattes, it is reasonable to conclude that – even without measuring – the plaintiffs’ lattes were underfilled."

The plaintiffs alleged that they were "induced" to purchase Starbucks lattes by the defendant’s misrepresentations and omissions. Consequently, there was no danger that they would be misled in the future and injunctive relief was not necessary. The claim for injunctive relief was, therefore, denied.

Reasonable consumer test. Starbucks unsuccessfully argued that the plaintiffs did not sufficiently allege violations of the CLRA, UCL and FAL, because the claims failed the reasonable consumer test. The alleged deception was not implausible as a matter of law, in the court's view. It was best left to a trier of fact to decide whether a significant portion of the latte-consuming public could believe that a "Grande" contains 16 ounces of fluid, measured without milk foam or in its cooled state.

Heightened pleading standard. The court also ruled that the plaintiffs met the heightened pleading standards of Federal Rule of Civil Procedure 9(b). Under Rule 9(b), a party alleging fraud "must state with particularity the circumstances constituting" the fraud. The plaintiffs satisfied the requirements by claiming that Starbucks falsely represented that its "Lattes contained ‘12 fl. oz.’ for a Tall, ‘16 fl. oz’ for a Grande, and ‘20 fl. oz.’ for a Venti" when they did not and that they were induced through the false representations to purchase underfilled Grande-sized Starbucks Lattes within the relevant class period in California Starbucks locations. These allegations gave the defendant ample notice of the particular circumstances underlying the plaintiffs’ claims against it, the court held.

The Case is No. 16-cv-01306-TEH.

Attorneys: Lawrence Timothy Fisher (Bursor & Fisher, P.A) for Siera Strumlauf. Robert James Guite (Sheppard Mullin Richter & Hampton LLP) for Starbucks Corp.

Companies: Starbucks Corp.

Cases: Advertising StateUnfairTradePractices CaliforniaNews