Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Cal.: Trader Joe’s products may have violated California Sherman Law, (Oct 8, 2013)

By Jody Coultas, J.D.

A Trader Joe’s customer stated a California Unfair Competition Law (UCL) claim under the unlawful prong based on Trade Joe’s Company’s alleged mislabeling of its products containing cane juice and soy milk in violation of the California Sherman Law, the federal district court in San Francisco has held (Gitson v. Trader Joe’s Company, October 4, 2013, Orrick, W.). The court dismissed the customer’s UCL claims under the fraudulent and unfair prongs, as well as California False Advertising Law (FAL) and Consumers Legal Remedies Act (CLRA) claims.

The purchaser alleged that various Trader Joe’s products were unlawfully and misleadingly labeled with the ingredient evaporated cane juice or organic evaporated cane juice instead of sugar, contained added preservatives or artificial colors despite statements on the label stating otherwise, and were labeled “milk,” but do not comply with the standardized definition for milk promulgated by the Food and Drug Administration. Based on the packaging and labeling of various Trader Joe’s products, the purchaser filed California Sherman Law claims. These alleged violations gave rise to an UCL unlawful claim. The purchaser also alleged that the labeling and packaging was misleading, deceptive, unfair, and fraudulent in violation of the UCL, FAL, and CLRA.

The court held that the purchaser was unable to state claims based on unspecified products. The purchaser sought to represent a class of people that purchased products without actually specifying those products. The claims failed to allege what the labels of those products stated or what kinds of products these categories included.

A number of the purchaser’s claims failed to meet the heightened pleading standard of Federal Rule of Civil Procedure 9(b), according to the court. The claims regarding Organic Lowfat Strawberry Yoghurt and Enchilada Sauce failed to reference the labels of these products or how they were misbranded or misleading. The purchaser also alleged that Trader Joe’s falsely advertised that its products were free from coloring or preservatives, but did not allege any misrepresentations made in connection with the products. A review of the product labels indicated that the products did not make a representation relevant to these allegations.

The purchaser failed to meet the reasonable consumer test, according to the court. The purchaser alleged that they were misled to believe that Organic Soy Milk complied with the FDA’s standardized definition of milk: The term “soy milk,” standing alone, is so well-established that a reasonable consumer could not believe that it is some type of cow’s milk. A reasonable consumer would not believe that Organic Soy Milk is cow’s milk and has the same qualities as cow’s milk in light of the prominence of the disclaimer on the label.

The court held that the purchaser adequately stated a claim that the Cane Juice and Soy Milk products violated the Sherman Law and, therefore, the unlawful prong of the UCL. The customer alleged that the use of the term evaporated cane juice rather than sugar or syrup products violated FDA regulations prohibiting manufacturers from referring to foods by anything other than their common and usual names. The consumer cited guidance and warning letters from the FDA indicating the FDA policy that sweeteners derived from sugar cane syrup should not be declared as evaporated cane juice. Because the Sherman Law incorporates federal standards, the FDA’s statements support the conclusion that the Sherman Law’s requirements have been violated as well. Warning letters are not binding and are advisory. However, warning letters to third parties where the FDA noted that it did not consider soy milk to be an appropriate common or usual name because it does not contain milk “nudged” the claims across the line from conceivable to plausible.

The case is No. 13-cv-01333-WHO.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) and Colin Harvey Dunn (Clifford Law Offices, P.C.) for Amy Gitson, Christine Vodicka and Deborah Ross. Carla Jean Christofferson and Randall W. Edwards (O’Melveny & Myers LLP) for Trader Joe’s Company.

Companies: Trader Joe’s Company

Cases: Advertising StateUnfairTradePractices CaliforniaNews