Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Consumer’s misleading and fraudulent labeling and packaging claims against Trader Joe’s can proceed, (Mar 18, 2014)

By Linda O’Brien, J.D., LL.M.

In a putative class action against a specialty retail grocer for alleged use of misleading labels and packages of various products, a consumer sufficiently pleaded facts to support her claims regarding products with the listed ingredient of evaporated cane juice under California’s Sherman Law, Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumer Legal Remedies Act (CLRA), the federal district court in San Francisco has decided (Gitson v. Trader Joe’s Company, March 14, 2014, Orrick, W.).

Amy Gitson purchased various yogurts, milk, and other products from Trader Joe’s. She filed a proposed class action suit, alleging that various Trader Joe’s products (1) were unlawfully and misleadingly labeled with the ingredient evaporated cane juice or organic evaporated cane juice instead of sugar, (2) contained added preservatives or artificial colors despite statements on the label stating otherwise, and (3) were labeled “milk,” but do not comply with the standardized definition for milk promulgated by the Food and Drug Administration (FDA) in violation of California’s Sherman Law. Gitson also alleged that the labeling and packaging was misleading, deceptive, unfair, and fraudulent in violation of the UCL, FAL, and CLRA. Trader Joe’s motion to dismiss the complaint was granted. Gitson filed an amended complaint and Trader Joe’s moved to dismiss the amended complaint (AC).

California Sherman Law. The court determined that the consumer sufficiently plead claims based on undisclosed additives products and substantially similar products with particularity. Under Federal Rule of Civil Procedure 9(b), a party must state with particularity the circumstances constituting fraud or mistake. The AC alleged that certain additives to Trader Joe’s sauce and truffle products were used as artificial flavor or chemical preservatives. The plaintiff’s allegations, if accepted as true, allow the reasonable inference that the FDA definition of the additives did not exclude the possibility that they could be used as a chemical preservative in the products.

Additionally, allegations regarding substantially similar purchased products that used the “evaporated cane juice” and “soymilk” in the ingredients were also adequately plead. The AC states why the substantially similar products are misleading in materially identical ways to the labels of purchased products. The AC also identifies specific purchased products bearing the alleged misrepresentation on the product label, the FDA regulations violated by each representation, why a reasonable consumer would be misled by the violations, and explains why the representations are allegedly unlawful and misleading. However, allegations regarding substantially similar unpurchased products with undisclosed additives lacked the required specificity and the motion to dismiss with respect to those claims was granted with leave to amend.

Standing. Gitson had standing to pursue claims regarding the evaporated cane juice products under the unlawful prong of the UCL. She claimed that the term concealed the fact that the ingredient was essentially sugar. Gitson adequately alleged actual reliance in that she read the product label, believed evaporated cane juice was not sugar, and would not have purchased the product if she had known that the ingredient was sugar.

UCL, FAL, and CLRA. Finally, Gitson adequately plead deceptive business practices claims under the unfair and fraudulent prongs of the UCL. Under the “reasonable consumer” test, the plaintiff must show that consumers are likely to be deceived by the representations. Gitson alleged with specificity what she found misleading about the term “evaporated cane juice,” that she believed the ingredient was not sugar, and she would not have purchased the products if she had known that the ingredient was in fact added sugar. It was plausible that a reasonable consumer whose food purchases are influenced by whether foods contain added sugars would be deceived by the term, the court concluded.

The case is No. 13-cv-01333-WHO.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) and Colin Harvey Dunn (Clifford Law Offices, P.C.) for Amy Gitson. Carla Jean Christofferson (O’Melveny & Myers LLP) for Trader Joe’s Company

Companies: Trader Joe’s Company

Cases: Advertising CaliforniaNews