Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Consumers’ false labeling claims against yogurt manufacturer fail, (Feb 24, 2014)

By Linda O’Brien, J.D., LL.M.

Three consumers lacked standing to plead false advertising claims against a yogurt manufacturer for labeling its yogurt products as evaporated cane juice and containing all natural ingredients in violation of California’s Unfair Competition Law (UCL), False Advertising Law (FAL) and Consumer Legal Remedies Act (CLRA), the federal district court in San Jose has ruled (Kane v. Chobani, Inc., February 20, 2014, Koh, L.).

Three consumers filed a putative class action against Chobani, Inc., alleging that the company mislabeled and misbranded sugar ingredients in its Greek yogurts as “evaporated cane juice” (ECJ), and misrepresented that the yogurts contained only natural ingredients. In violation of the UCL, FAL, and CLRA, the plaintiffs claimed that (1) ECJ was dried cane syrup, or essentially sugar, (2) the yogurts included unnatural ingredients for color, and (3) had they known the yogurts contained added sugar and artificial ingredients, they would not have purchased them. The plaintiffs’ motion for a preliminary injunction against further sale of the yogurt products with the disputed labels was denied. After the plaintiffs’ complaint was dismissed for lack of standing, leave was granted to file an amended complaint to cure the pleading deficiencies. Subsequently, the defendant moved to dismiss the amended complaint.

ECJ claims. The court found that the plaintiffs failed to adequately plead reliance on the defendant’s ECJ statements on the yogurt labels. The UCL prohibits business practices that are unlawful, unfair, or fraudulent. To have standing under the UCL, FAL, and CLRA, a plaintiff is required to demonstrate actual reliance on the defendant’s alleged misrepresentation and an economic injury was suffered as a result.

In their amended complaint, the plaintiffs continue to allege that Chobani’s use of the term “ECJ” was misleading because it concealed the fact the ingredient was essentially sugar, and add that they did not know ECJ was sugar. In rejecting the plaintiffs’ theory of reliance - they did not know that ECJ was a sweetener and believed it was an ingredient healthier than sugar, the court noted that the theory was implausible, since the plaintiffs failed to explain how they understand that dried cane syrup was syrup but did not believe ECJ was not. The plaintiffs merely added an allegation to the amended complaint that they were “looking for added sugar” when scanning the ingredients on the yogurt products and failed to recognized that ECJ was a form of added sugar. The court observed that the plaintiffs were specifically put on notice of this deficiency in the order dismissing their complaint.

All natural claims. The court also found that the plaintiffs failed to adequately plead reliance on the defendant’s “all natural” statements on the yogurt labels. The plaintiffs alleged that Chobani’s “all natural” claims were deceptive because the yogurts were artificially colored using fruit and vegetable juice concentrate. The court rejected the plaintiffs’ allegations as implausible because the product labels specifically disclosed that fruit or vegetable juice was added for color. A new allegation in the amended complaint - that the “all natural” representations were unlawful as the coloring agents were not natural products - was insufficient to plead reliance with particularity. Moreover, the plaintiffs provided no evidence to support their allegation that fruit or vegetable juice was unnatural, the court noted.

Finally, in dismissing the plaintiffs’ claims with prejudice, the court noted that the plaintiffs had numerous opportunities to cure the pleading deficiencies and failed to do so. Hence, to allow further amendment would be futile.

The case is No. 12-CV-02425-LHK.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) and Colin Harvey Dunn (Clifford Law Offices, P.C.) for Katie Kane. Dale Joseph Giali (Mayer Brown LLP) for Chobani, Inc.

Companies: Chobani, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews