Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Tea manufacturer may be liable under California law for mislabeling, (Jan 8, 2014)

By Jody Coultas, J.D.

A tea purchaser stated California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA) claims against tea manufacturer Twinings North America, Inc. for allegedly mislabeling its green and black teas, the federal district court in San Jose has held (Lanovaz v. Twinings North America, Inc., January 6, 2014, Whyte, R.).

The purchaser claimed that Twinings’ green and black tea labels and website contained misleading statements about the teas being a source of antioxidants. Twinings’ tea contains flavonoids, a type of antioxidant. The Food and Drug Administration (FDA) does not allow nutrient content claims about flavonoids because the FDA has not established a recommended daily intake for flavonoids. The purchaser sought monetary and injunctive relief for herself and on behalf of a purported class of tea purchasers who bought allegedly mislabeled products.

There was a genuine issue of fact as to whether the purchaser relied on Twinings’ alleged misrepresentations, the court held. UCL claims based on fraud or misrepresentations require the plaintiff to show reliance. Reliance may be established by proving that the misrepresentation was an immediate cause of the injury-producing conduct. The purchaser argued that she showed reliance based on a presumption of materiality. Evidence of materiality only establishes a presumption of reliance, and a presumption cannot survive if the evidence establishes an actual lack of reliance. The purchaser’s deposition showed that she read the Twinings’ label, and reading the labels reinforced what people had told her about the teas. The labels contributed to the purchaser’s decision to purchase Twinings green teas and to continue buying Twinings Earl Grey tea.

The court held that the statements at issue were not nutrient content claims and Twinings’ request for summary judgment on the issue was denied. Because the teas actually contained antioxidants, the purchaser had to establish that Twinings violated the FDA regulations concerning nutrient content or health claims. Twinings argued that the purchaser did not interpret Twinings’ labels or website as making nutrient content claims and thus the claims based on violations of FDA labeling rules failed. A claim that expressly or implicitly characterizes the level of a nutrient of the type required to be in nutrition labeling may not be made on the label or in labeling of foods unless the claim is made in accordance with FDA regulations. The label at issue described Twinings’ tea as a “Natural Source of Antioxidants.” Twinings’ green tea label stated it was a “natural source of protective antioxidants” and “provide[d] a great tasting and healthy tea drinking experience.” The FDA has not officially defined “source of” or “natural source of” as making a nutrient content claim, but has defined “excellent source of,” “good source of,” “contains,” and “provides” as nutrient content claims. Although “natural source of antioxidants” does not include a qualifying term describing the level or quantity of antioxidants, it does imply a sufficient amount to be significant. Twinings’ labels only made, at most, a generalized health claim.

Twinings’ labels only made, at most, a generalized health claim, and such a general claim is not a violation of FDA regulations, according to the court. Under FDA regulations, a health claim is a statement that “expressly or by implication … characterizes the relationship of any substance to a disease or health-related condition.” Although Lanovaz argues that the term “protective,” as used in the label, implies protection from disease by citing to an FDA regulation defining the term “drug,” her argument is not supported by the plain language of the label or the regulation she cites. Because the label does not say anything about a disease, it did not make disease-related health claim. Additionally, a label claiming “protective antioxidants” and a “healthy tea drinking experience” was too general to relate to a “health-related condition.”

The court denied Twinings’ motion to dismiss for lack of standing. Twinings argued that the purchaser lacked standing because there was no evidence the purchaser paid a premium, which was needed to establish injury. Although the purchaser may have significant difficulty proving damages, that was not an issue for standing. Evidence that could establish injury may be obtained through discovery.

Standing. The purchaser had standing to seek injunctive relief, according to the court. Standing for injunctive relief requires a showing of “a very significant possibility of future harm.” Twinings argued that the purchaser cannot show a possibility of future harm because she will not be buying Twinings teas in the future. A number of courts have noted that precluding injunctive relief standing in claims for false advertising under California consumer laws because a plaintiff who had been injured would always be deemed to avoid the cause of the injury thereafter was contrary to the objectives of the laws. The court agreed and found that the purchaser could pursue injunctive relief.

Twinings argued that the purchaser did not have standing for her claims related to the 45 varieties of black, white, and green tea she did not purchase. A class representative has standing to bring substantially identical claims on behalf of a class and that Lanovaz’s claims related to the 45 varieties of tea she did not purchase were allegedly substantially identical. This issue was better resolved under Federal Rule of Civil Procedure 23, the court held.

The case is No. C-12-02646-RMW.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Nancy Lanovaz. William Lewis Stern (Morrison & Foerster LLP) for Twinings North America, Inc.

Companies: Twinings North America, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews