Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: False labeling claims preempted in part by Food, Drug, and Cosmetic Act, (Jan 27, 2014)

By John W. Arden, J.D., LL.M.

Consumers’ state law claims for false labeling on I Can’t Believe It’s Not Butter! spray margarine were preempted by the federal Food, Drug, and Cosmetic Act with regard to allegations of false serving sizes and nutrient claims, but not preempted with regard to allegations of failure to note the fat content of some ingredients, the federal district court in San Francisco has held (Pardini v. Unilever United States, Inc., January 22, 2014, Conti, S.). Accordingly, the court granted dismissal of the former claims, but denied dismissal on the latter claims.

Consumers Kym Pardini and Carrie Wood brought this putative class action, claiming that Unilever mislabeled its I Can’t Believe It’s Not Butter spray margarine in several ways, in violation of the federal Food, Drug, and Cosmetic Act (FDCA), the New Jersey Consumer Fraud Act, the California Unfair Competition Act, and the Missouri Merchandising Practices Act. In addition to violations of state unfair trade practices laws, the consumers alleged fraud by concealment, breach of express warranty, and intentional misrepresentation.

The district court previously dismissed the complaint in a July 9, 2013, order, which found the claims preempted except to the extent that they were predicated on Unilever’s failure to provide a notation on the nutrition panel that certain ingredients contained fat. The court dismissed claims with leave to amend, except for an unjust enrichment claims, which was dismissed with prejudice.

The consumers filed a second amended complaint, alleging the same basic facts but adding a Missouri-based plaintiff. Unilever moved to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), arguing that the amended claims were preempted, just as the original claims were.

Preemption

The FDCA, as amended by the Nutritional Labeling and Education Act of 1990, sets forth a comprehensive set of food labeling requirements and establish the conditions under which food is considered misbranded. The Act contains a broad preemption provision that prohibits states and other political subdivisions from establishing any requirement for nutrition labeling that is not identical to those set forth in §343(q) or §343( r) of the Act.

Unilever argued that all of the consumer claims were preempted because they imposed requirements that were not identical to the FDCA and regulations promulgated under the FDCA. Specifically, it maintained that the FDCA preempted claims regarding artificially small serving sizes used to understate the amounts of fat and calories; the 0 Fat and 0 Calorie claims; and the failure to include an asterisk and explanatory notations when making a “0 fat” claim on the front panel.

Service size claim. When a single serving of a particular product contains less than 0.5 grams of fat, Food and Drug Administration (FDA) regulations provide that the product’s label shall express the fat content per serving as zero. Likewise, calories per serving may be expressed as zero when a product contains less than five per serving. Consumers alleged that Unilever used unlawfully small serving sizes so that it could round down the fat and calorie content to zero. The FDCA requires labeling to list “the serving size which is an amount customarily consumed.”

Unilever contended that its serving size was consistent with FDA regulations covering spray fats and oils. The consumers claimed that the “spray type” category, which is intended to govern nonstick cooking sprays, did not apply to the product, which is intended for use as a food topping or alternative to butter.

The court was not convinced by these arguments, which restated rejected contentions from the consumers’ first amended complaint. Consumers never cited any authority suggesting that the FDA’s examples of nonstick cooking spray were exclusive and failed to show how the product was not a spray type fat or oil. The court found it was more plausible that Unilever must use the defaulted service size of one tablespoon for fat or oil unless the product fit within a more specific subcategory. The proper subcategory was “Fats or Oils: Spray Type.” The fact that some consumers might choose to use more did not mean that the product was mislabeled, the court ruled.

The consumers continued to fail to state definitively how the product should be classified and what its serving sizes should be, according to the court. Their insistence that the serving size should be listed as 40 sprays remained implausible. For these reasons, the serving size claim was preempted and dismissed with prejudice.

Nutrient content claim. Because the serving size claims were dismissed, the nutrient content claims had to be dismissed as well. Unilver’s rounded figures were appropriate, the court held.

“Asterisk” claim. In its July 9, 2013, order, the district court held that the “asterisk” claim was not preempted because it aligned with 21 C.F.R. §101.62(b), which governs fat content claims. Unilever contended that this regulation was inapplicable and that the court should have evaluated the claim under a different regulation that relates to quantity claims. It alleged that the fat content regulation applied only when labeling makes claims about an entire product having zero fat. The court rejected this contention, finding that the product was subject to the more specific regulation requiring disclaimers when a food label claims that the product contains no fat. Thus, the asterisk claim was not preempted.

Fraud claims. Tort claims based on violations of the FDCA alone or on preempted theories were precluded, according to the court, but causes of action premised on the “asterisk” claim were allowed to proceed.

State unfair trade practices claims. The July 9, 2013, order dismissed all non-California state unfair trade practices claims because the consumers did not allege to have purchased the product outside of California and therefore lacked standing to assert claims under other states’ consumer protection laws. Since then, the consumers added plaintiff Carrie Wood, who alleged violation of the Missouri law based on her Missouri purchases of the product.

The court found that the Missouri law claim premises on the “asterisk” claim may go forward. The New Jersey law claim could not proceed, since the plaintiffs had no connection to New Jersey.

The case is No. 13-1675 SC.

Attorneys: Shana E. Scarlett (Hagens Berman Sobol Shapiro LLP) for Kym Pardini. William Lewis Stern (Morrison & Foerster LLP) for Unilever United States, Inc.

Companies: Unilever United States, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews