Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Ill.: Claims trimmed in suit against Smartfoods, (May 7, 2025)

By Donielle Tigay Stutland

Suit alleging that Smartfoods popcorn contains maltodextrin, a “highly processed and synthetic ingredient” used as both a preservative and flavoring agent is dismissed in part.

The federal district court in Chicago partially dismissed a class action against snack food makers Smartfoods, Inc. and PepsiCo, Inc. A group of consumers filed a lawsuit alleging that two types of Smartfood popcorn were falsely and deceptively marketed, as the popcorn bags state “No Artificial Flavors” and “No Artificial Preservatives,” but the product contains maltodextrin. The court dismissed claims related to Movie Theater Butter Popcorn variety, as no plaintiff had purchased this product, so the consumers lacked standing. The court also dismissed claims based on an artificial flavor theory. The court determined that the claims regarding maltodextrin as an artificial preservative, along with consumers’ common law claims for breach of warranty and unjust enrichment claims could proceed (Wilson v. Smartfoods, Inc., No. 1:24-cv-12814 (N.D. Ill. May 5, 2025)).

Background. A group of consumers filed a class action against Smartfoods, Inc. and PepsiCo, Inc., alleging that two types of the defendants’ Smartfood popcorn are falsely and deceptively marketed. Specifically, the consumers allege that the front each bag of Smartfood White Cheddar Popcorn and Smartfood Movie Theater Butter Popcorn, contained the phrases “No Artificial Flavors” and “No Artificial Preservatives,” however, the consumers contend those representations are false and misleading because the product contains maltodextrin which is both an artificial flavor and artificial preservative. The consumers purchased Smartfood White Cheddar Popcorn in Illinois, New York, and California. They allege that if they knew the White Cheddar Popcorn contained maltodextrin they wouldn’t have purchased it or would have paid substantially less for it.

The consumers’ lawsuit asserts claims under the false advertising and consumer protection laws of Illinois, New York, and California. PepsiCo and Smartfoods moved to dismiss the suit.

Standing. The court first addressed Smartfoods’ contention that the consumers lacked standing. The court noted that the suit alleges claims concerning both Smartfood White Cheddar Popcorn and Smartfood Movie Theater Butter Popcorn, but none of the consumers purchased the Movie Theater Butter Popcorn. Here the court concluded that the consumers lack Article III standing to pursue claims related to products they did not purchase. The consumers only injuries relate to the White Cheddar variety. The court dismissed the claims related to Smartfood Movie Theater Butter Popcorn.

Consumer protection. Turning to the consumer protection claims, the court outlined that in order to state a claim under any of the state consumer protection statutes, the Plaintiffs must plausibly allege that PepsiCo’s labeling is “likely to deceive reasonable consumers.” The court first addressed PepsiCo’s argument that the consumers failed to plausibly allege that maltodextrin is artificial. The court noted that the consumers repeatedly contend that maltodextrin is synthetic, not found in nature, and created through industrial processes and other courts have found similar allegations sufficient. For example, in Daly, a consumer alleged that labeling protein bars as containing “no artificial sweeteners” was deceptive because they contained maltitol syrup, a synthetic and unnatural substance. PepsiCo further argued that because Plaintiffs admit maltodextrin is made from natural ingredients by using “water and enzymes,” Plaintiffs have failed to allege that a reasonable consumer would believe the product is artificial. The consumers allege that maltodextrin is artificial despite being made from natural ingredients. [They further allege that reasonable consumers believe artificial ingredients are “made by people” and detail how maltodextrin is produced, at the molecular level, through industrial processes. The court rejected PepsiCo’s argument as a factual issue inappropriate for the pleading stage.

PepsiCo next argued that in order for its labeling to be deceptive, the consumers must allege that maltodextrin imparts Smartfood White Cheddar Popcorn’s “characterizing flavor.” The court agreed that the consumers failed to meet the heightened Rule 9(b) pleading standard, as the consumers must explain why defendants’ statement is false, part of which involves alleging how maltodextrin was used as a flavoring, not just as a flavor enhancer. The court noted FDA regulations distinguish between flavors and flavor enhancers, and the consumers’ claims could be preempted if maltodextrin is only a flavor enhancer. To sustain their “flavoring” claim, the court indicated that the consumers must explain how maltodextrin creates, simulates, and/or reinforces the popcorn’s white cheddar flavor, which the court found the consumers did not do.

PepsiCo also argued that “Plaintiffs’ claims concerning artificial flavors are preempted because they fail to plausibly allege that maltodextrin functions as a flavor.” The court noted that, “If Plaintiffs are unable to plausibly allege that maltodextrin functions as a flavor, then their claims would be preempted because the FDA permits artificial flavor enhancers to be used in products that bear a label touting the lack of artificial flavors.” The court gave the consumers the opportunity to amend their complaint to meet both their Rule 9(b) obligations and avoid preemption with regard to their artificial flavor claims.

Further, PepsiCo argued that the consumers failed to allege maltodextrin functioned as a preservative in the popcorn. The court explained the argument as follows, “It’s not enough, according to PepsiCo, that maltodextrin can be a preservative; Plaintiffs must allege that PepsiCo used it in its White Cheddar Popcorn for a preservative purpose. PepsiCo argues that FDA regulations do not identify maltodextrin as a preservative, and Plaintiffs’ allegations are ‘unsubstantiated.’” The court rejected this argument, finding that the consumers’ sufficiently alleged that maltodextrin is an artificial preservative in Smartfood White Cheddar Popcorn. The consumers alleged, with cited articles for support that maltodextrin has preservative qualities and acts by reducing water activity and inhibiting the growth of microorganisms.

The court indicated that whether maltodextrin actually functions as a preservative in the popcorn is a factual question for discovery, and the court found the “no artificial preservatives” label could plausibly deceive reasonable consumers.

Common law claims. Finally, the court reviewed the consumers’ common law claims for breach of express and implied warranty under California and New York law and for unjust enrichment. PepsiCo argued that just as the consumer protection claims should be dismissed, so too should the consumers’ common law claims.

The court outlined that California and New York courts’ analysis of express and implied warranty claims typically tracks their analysis of consumer protection claims. For a breach of express warranty claim, “the plaintiff must allege the terms of the warranty, reasonable reliance, and that a breach of the warranty proximately caused his or her injury.” In California, “where the plaintiff claims that the defendant failed to disclose the presence of an allegedly artificial ingredient, it has stated a claim for breach of the implied warranty.” The court found that because the consumers’ claims survived dismissal for the artificial preservative theory, as they track the consumer protection claims. the consumers adequately alleged the warranty terms (“no artificial preservatives”), reliance, and injury due to the misrepresentation.

With respect to the consumers’ unjust enrichment claim, the court indicated that this claim can proceed in the alternative, as it would be premature to determine if it would be duplicative of other remedies.

The Case is No. 1:24-cv-12814.

Judge: Jenkins, L.

Attorneys: Robert Abiri (Custodio & Dubey LLP) for Rajeeyah Wilson. Carrie Akinaka (Perkins Coie LLP) for Smartfoods, Inc.

Companies: Smartfoods, Inc.

Cases: Advertising StateUnfairTradePractices IllinoisNews