Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Costco product mislabeling suit stayed pending Ninth Circuit rulings, (Nov 3, 2015)

By Linda O’Brien, J.D., LL.M.

The federal district court in San Jose, California has stayed an action by consumers against retailer Costco over alleged unlawful or misleading content claims and omissions on product packaging, pending decisions by the U.S. Court of Appeals in San Francisco in three similar false and misleading product labeling cases (Thomas v. Costco Wholesale Corporation, November 2, 2015, Freeman, B.).

In June 2012, consumers Karen Thomas and Lisa Liddle filed suit against warehouse club Costco, alleging that they purchased several Kirkland Signature food products at Costco retail locations that were unlawfully mislabeled. Specifically, the purchasers maintained that the products’ packaging contained misrepresentations, including unlawful or misleading nutrient content claims; claims about antioxidant content; "no sugar added" claims; health claims; "no trans fat" claims; "evaporated cane juice" claims; synthetic chemical content omissions; listings of product ingredients not in descending order of predominance by weight; and "preservative free" claims.

Defendants filed several motions for dismissal, and the plaintiffs filed amended complaints. In August 2015, the court denied the defendants’ motion for summary judgment. Before the court was the plaintiffs’ motion to stay the action pending decisions by the Ninth Circuit in Kosta v. Del Monte Foods, Inc., Case No. 15-16974; Brazil v. Dole Food Co., Inc., Case No. 14-17480; and Jones v. ConAgra Foods, Case No. 14-16327.

In Kosta, the plaintiffs claimed that labels on canned fruit and vegetable products were false and misleading in connection with the nutrient content and antioxidant claims, and in failing to disclose preservatives and chemical content. The plaintiffs in Brazil contended that various fruit products were false and misleading because of statements on product labels such as claims of being “all natural.” In Jones, the plaintiffs alleged that various product labels contained false and misleading statements regarding nutrient and antioxidant content, “preservative-free” claims, and synthetic chemical content omissions.

In determining whether a stay was appropriate, the court weighed three factors: (1) the possible damage which may result from the granting of a stay; (2) the hardship or inequity which a party may suffer in being required to go forward; and (3) the orderly course of justice measured in terms of simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay.

In granting the stay, the court found that the Ninth Circuit’s decisions in Kosta, Brazil, and Jones would likely provide substantial guidance on issues material to class certification and whether label statements such as “all natural” could mislead a reasonable consumer. First, a stay would not cause harm to the plaintiffs, since the plaintiffs did not oppose the defendants’ motion. Second, absent a stay, both parties would be in danger of needlessly spending time and resources on issues that may change when the Ninth Circuit issues its decisions in Kosta, Brazil, and Jones. Finally, the stay would simplify issues, proof, and questions of law. Given the overlap between the present case and the issues in Kosta, Brazil, and Jones, guidance from the Ninth Circuit would aid in the orderly resolution of the case, the court concluded.

The case is No. 5:12-cv-02908-BLF.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Karen Thomas. Amanda L. Groves (Winston & Strawn LLP) for Costco Wholesale Corp.

Companies: Costco Wholesale Corp.

Cases: Advertising CaliforniaNews