Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Hershey wins dismissal of most Lily’s ‘less sugar‘ labeling claims, (May 14, 2026)

By Martin A. Steinberg, J.D.

Hershey won dismissal of most claims that its Lily’s chocolate labels misled consumers with “no sugar added” and “less sugar” statements, though a California federal court allowed limited claims based on alleged labeling violations to proceed.

The federal district court in San Jose, California granted in part Hershey’s motion to dismiss claims challenging the labeling of Lily’s chocolate products as “no sugar added” and “less sugar.” The court dismissed the consumer’s claims regarding products she did not purchase, with leave to amend, because she had not adequately alleged that those products were substantially similar to the three Lily’s products she purchased. The court also dismissed the FAL, CLRA, and UCL unfair- and fraudulent-prong claims without leave to amend, holding that the challenged labeling was not likely to mislead a reasonable consumer into believing the products were lower in saturated fat or had less sugar than zero-sugar chocolates. However, the court allowed the UCL unlawful-prong claim and unjust enrichment claim to proceed, finding that the consumer plausibly alleged she bought the products when they violated California’s Sherman Law by omitting required labeling disclosures (Escobar v. The Hershey Company, No. 24-cv-06844-EJD (N.D. Cal. May 12, 2026)).

Background. A California consumer purchased three Lily’s chocolate products—Dark Chocolate Baking Chips, Peppermint Flavor Baking Chips, and a Coconut Dark Chocolate Bar—and sought to represent a class of California purchasers. Hershey, a Delaware corporation headquartered in Pennsylvania, manufactures and distributes food products nationwide and acquired Lily’s Sweets in June 2021.

The consumer challenged front-of-package nutrient-content claims stating “no sugar added” and “LESS SUGAR.” She asserted that because the products allegedly had relatively high saturated-fat levels, FDA regulations required Hershey to place a saturated-fat disclosure next to those claims, and that the “less sugar” claim also required comparison to an appropriate reference food. According to the consumer, Hershey’s failure to include those disclosures caused her to believe the products were healthier than competing products, to buy them, and to pay more than she otherwise would have. She asserts claims under the Unfair Competition Law (UCL), California’s False Advertising Law (FAL), California’s Consumer Legal Remedies Act (CLRA), and unjust enrichment.

Prior order on leave to amend. The court first addressed whether the consumer’s new “reference food” theory exceeded the scope of the court’s prior order granting leave to amend. Hershey argued that the amended complaint improperly added a new claim by alleging that the “less sugar” label was misleading because it omitted a reference food. The court rejected that argument, reasoning that although the consumer added new facts supporting a new theory, the legal claims remained the same. The amendment, therefore, stayed within the scope of the court’s leave to amend.

Standing. The court dismissed the claims based on non-purchased products, but granted leave to amend because the defect might be curable. Although the consumer bought only three products, she sought to sue over a broader range of Lily’s chocolate bars, baking products, peanut butter cups, chocolate-covered nuts, chocolate-covered caramels, and chocolate-covered popcorn. Hershey argued that those products were not substantially similar because they had different ingredients and different sugar and saturated-fat levels.

The court noted that district courts in the Ninth Circuit often allow claims over unpurchased products when the products and alleged misrepresentations are substantially similar. It found that the consumer adequately alleged similarity as to the legal theory and injury because she claimed the products used the same “less sugar” and “no sugar added” representations without required disclosures or reference-food information. But she failed to plead physical similarity or show that the similarities outweighed the differences because she did not identify precisely which of Lily’s products were included in the suit.

Failure to state a claim.

FAL. The court dismissed the False Advertising Law claim without leave to amend. It held that the consumer had not plausibly alleged that the “no sugar added” and “LESS SUGAR” statements were likely to mislead a reasonable consumer. Her saturated-fat-disclosure theory repeated allegations the court had already found insufficient. Her reference-food theory also failed because the “less sugar” statement was at most ambiguous, allowing the court to consider the back label, which disclosed that the products contained one gram of sugar per serving; a reasonable consumer, therefore, would not think the products contained less sugar than zero-sugar chocolates. The court also rejected her “health halo” theory, finding it implausible that reasonable consumers would view chocolate products as carrying broad positive health implications merely because they were labeled “no sugar added” or “less sugar.”

CLRA. The court dismissed the Consumer Legal Remedies Act claim without leave to amend. The consumer alleged violations of several CLRA provisions, including that Hershey misrepresented the products’ characteristics, ingredients, benefits, quantities, standard, quality, or grade, and advertised them in a manner inconsistent with how they were sold. But the CLRA uses the same reasonable-consumer standard as the FAL. Because the court had already concluded that the challenged labeling was not likely to mislead a reasonable consumer, the CLRA claim also failed.

UCL. The court allowed the UCL unlawful-prong claim to proceed but dismissed the UCL unfair- and fraudulent-prong claims without leave to amend. The unlawful-prong claim survived because the consumer plausibly alleged that Hershey violated California’s Sherman Law, which incorporates federal food-labeling regulations, by using nutrient-content claims without required saturated-fat disclosures and reference-food information. The court found that she cured the prior timing defect by alleging that the products were mislabeled from the time of Hershey’s June 2021 acquisition of Lily’s until spring 2024, and that she bought them between October 2021 and March 2022. The court also held that no reasonable-consumer showing was required because the predicate Sherman Law violations did not require such a showing.

The unfair- and fraudulent-prong claims failed because the reasonable-consumer standard governs those theories. Since the court had already held that the challenged labels and omissions were not likely to mislead a reasonable consumer, those UCL theories were dismissed without leave to amend.

Claims for equitable relief, including unjust enrichment. The court declined to dismiss the consumer’s equitable claims, including unjust enrichment and the surviving UCL theory, for failure to allege an inadequate legal remedy. Hershey argued that equitable relief was unavailable because the consumer had an adequate remedy at law through her CLRA damages claim. The court distinguished cases where plaintiffs strategically abandoned or failed to timely pursue legal remedies. Here, the court had dismissed the CLRA claim on the merits, meaning the consumer no longer had a plain, adequate, and complete legal remedy. The court therefore allowed the equitable claims to proceed.

Conclusion. The court dismissed all claims concerning unpurchased products for lack of standing, but allowed the consumer to amend that portion of the complaint, subject to the limitation that she may not replead the dismissed FAL, CLRA, or UCL unfair- and fraudulent-prong claims. The court dismissed the FAL, CLRA, and UCL unfair- and fraudulent-prong claims without leave to amend, but denied dismissal of the UCL unlawful-prong claim and unjust enrichment claim. Any third amended complaint must be filed within 21 days.

The Case is No. 24-cv-06844-EJD.

Judge: Davila, E.

Attorneys: John Ryan Gustafson (Good Gustafson Aumais LLP) for Rebecca Escobar. Naoki Stephen Kaneko (Shook Hardy & Bacon L.L.P.) for The Hershey Co.

Companies: The Hershey Co.

Cases: Advertising CaliforniaNews