Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: ‘Reduced fat’ chip claims get crunched, ‘All Natural’ claims remain healthy, (Aug 4, 2014)

By Bryant Storm, J.D.

A district court dismissed some of a consumer’s claims challenging the allegedly misleading packaging on types of Kettle Brand Chips®. The court rejected some of the consumer’s claims because the consumer failed to identify which statements he relied on when purchasing the product. However, the court allowed the consumer’s claims challenging the use of the term “all natural” to continue. The court preserved them because the consumer raised a legitimate question regarding the authenticity of the manufacturer’s promotional statements and because the ingredient list allegedly did not conform to the product’s advertising claims (Hall v. Diamond Foods, Inc., July 31, 2014, Chesney, M.).

Richard Hall purchased multiple varieties of Kettle Brand Chips which are manufactured by Diamond Foods, Inc. Hall purchased Reduced Fat Sea Salt Chips and Kettle Brand Backyard Barbecue Potato Chips. The packaging of the Sea Salt Chips stated that the chips were “40% reduced fat potato chips.” The bottom of the bags contained a statement that the the “Sea Salt chips have bold flavor and hearty crunch and 40% reduced fact.” Some of the bags also stated that the chips contained “40% less fat than regular potato chips.” The Backyard Barbecue Chip packaging contained several statements indicating they were “all natural and free of synthetic or chemical ingredients.” The chips allegedly contain “synthetic ingredients, artificial flavors, and color additives such as citric acid, maltodextrin, and paprika extract for color.”

Claims. Hall brought seven legal challenges against Diamond Foods under California law. Hall alleged that the advertising claims violated section 17200 and 17500 of the California Business & Professions Code and Consumers Legal Remedies Act (CLRA) on the grounds that the statements were, among other things, fraudulent, misleading, and untrue. With respect to the “reduced fat” claims, Hall contended that the claim was misleading because they were not clear regarding which chips the reduced fat chips were being compared to. Hall’s other claims contended that Diamond Foods violated Sections 1750 through 1784 of the CLRA because the statements were misleading to consumers. Hall’s last cause of action was a claim for restitution based on a quasi-contract theory.

Reduced fat. The court dismissed Hall’s claims which challenged the “reduced fat” statements on Diamond Food’s chip packaging because Hall failed to indicate in his complaint which statements he relied on when purchasing the chips. The court held that if Hall only relied on the front of the packaging and not the back, Hall’s claims related to the back of the packaging had to fail because each of his claims required a showing that he relied upon the misleading statements. Additionally, the court held that if Hall read each of the statements he listed in his compliant, then he should have realized that the 40 percent statement was in reference to “regular potato chips” and not some other Kettle Brand product. By failing to explain what specifically he relied on, Hall defeated his own claim.

All natural. Hall’s false advertising claims under the CLRA were evaluated by the court under a “reasonable consumer test.” The court determined that Hall’s claims premised on the misleading nature of the “All Natural” statements could proceed because a reasonable consumer would not have understood Diamond Food’s definition of “All Natural,” which equated “All Natural” with something other than a classification that all of the ingredients in the product were 100 percent natural. The court also rejected the manufacturer’s contention that a misleading “All Natural” statement on the front of the packaging could be made permissible by contradictory information within the ingredient list.

Other claims. The court dismissed Hall’s claims which challenged allegedly false and deceptive statements on Diamond Food’s website because Hall failed to demonstrate whether he read any of the statements. Hall’s quasi-contract theory was permitted to continue because the court held such a cause of action did exist in circumstances where there was not a formal contract but a consumer relied to his or her detriment upon fraudulent statements on a food label.

Second chance. The court made clear that, although it was dismissing some of his claims, the court would give Hall a second opportunity to correct the deficiencies by allowing him to file an amended complaint.

The case number is C-14-2148 MMC.

Attorneys: Anthony Joshua Orshansky (CounselOne, PC) for Richard Hall. Amanda L. Groves (Winston & Strawn LLP) for Diamond Foods, Inc.

Companies: Diamond Foods, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews