Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Class action over Whole Foods’ “All Natural” labeling partially dismissed, (Jun 4, 2014)

By Greg Hammond, J.D.

Whole Foods Market Group, Inc.’s motion to dismiss consumers’ statutory and common law claims that the company unlawfully and misleadingly labeled numerous products “All Natural,” when they contained the synthetic ingredient Sodium Acid Pyrophosphate (SAPP), was granted in part. In reaching its decision, the federal district court in San Francisco determined that the consumers did not have standing to bring a claim for injunctive relief, but they did have standing to bring their claims independently and on behalf of unnamed class members (Garrison v Whole Foods Market Group, Inc., June 2, 2014, Chhabria, V).

Background. Mary Garrison and Grace Garrison brought a putative class action against Whole Foods, alleging that the grocery chain’s products were unlawfully labeled “All Natural” and misled consumers because the products contained SAPP, a synthetic ingredient. Consequently, the Garrisons brought claims under California’s consumer protection statutes, as well as common law claims. Whole Foods moved to dismiss the complaint and to strike the Garrisons’ allegations regarding unpurchased products.

Standing. In support of its motion to dismiss, Whole Foods argued that the Garrisons did not have individual standing, standing to bring claims based on unpurchased products, or standing to bring a claim for injunctive relief. The court agreed with the company’s injunctive relief argument, noting that because the consumers were aware the products contain a synthetic ingredient, there was no danger that they will be misled in the future. Consequently, the Garrisons’ claim for injunctive relief was dismissed with prejudice.

However, the court disagreed with Whole Foods’ remaining standing arguments. Specifically, it found that the Garrisons plausibly alleged that because of the misleading labels, they spent money they otherwise would not have spent, demonstrating economic injury that can be remedied by a damages award. Further, it was found that they sufficiently demonstrated that the labels on the three products they purchased were nearly identical to the other three products they did not purchase. Consequently, the court concluded that the Garrisons had standing to bring individual claims and claims on behalf of the unnamed class members for any of the six products in question.

CLRA. Whole Foods contended that the Garrisons’ California Consumers Legal Remedies Act (CLRA) claim should be dismissed because they failed to provide proper notice. The Garrisons alleged that they gave Whole Foods the required notice more than 30 days prior to filing their amended complaint, and that Whole foods failed to correct their product labels. The court noted that Whole Foods failed to cite any authority that would require the Garrisons to provide the court with a copy of their notice at the motion to dismiss stage of litigation. Further, because the court was required to take the Garrisons’ allegations as true for motion to dismiss purposes, it determined that they were allowed to proceed with their CLRA claim.

Unjust enrichment. The Garrisons also brought a claim for unjust enrichment, which Whole Foods sought to dismiss. The court reasoned that because it was unclear which states’ laws should be applied for this nationwide common law claim and because it was duplicative of other statutory and common law claims in this case, the unjust enrichment claim should be dismissed with prejudice.

Consequently, the court partially granted Whole Foods’ motion to dismiss with regard to the Garrisons’ unjust enrichment and injunctive relief claims, but denied the remaining portions of the motion. In addition, because it was determined that the Garrisons could bring claims based on products they did not purchase, Whole Foods’ motion to strike those allegations was denied.

The case number is 13-cv-05222-VC.

Attorneys: Courtland Wayne Creekmore (Scott Cole & Associates, APC) for Mary Garrison. Jay W. Connolly (Seyfarth Shaw LLP) for Whole Foods Market Group, Inc.

Companies: Whole Foods Market Group, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews