Antitrust Law Daily Wrap Up, ADVERTISING—N.D. Ill.: Consumer fraud claim against Coca-Cola about ‘sparkling soda water’ labeling survives dismissal, (Oct 15, 2024)

By Justin Marcus Smith, J.D.

The court said reasonable consumers might understand “sparkling soda water” as containing no artificial sweeteners.

A consumer could proceed with his claim that the labeling of certain Fresca sparkling soda water products was misleading, even though it listed aspartame as an ingredient on the back panel, held the federal district court in Chicago. Applying the reasonable consumer standard, the court found reasonable consumers might not expect “sparkling soda water” to contain any kind of sweetener. However, the court reached a different conclusion about the consumer’s “flavoring” claim where the labels conformed to FDA regulation by appropriately disclosing the presence of “artificial” and “natural” flavors or else the phrase “with other natural flavors.” The consumer’s express warranty and unjust enrichment claims could proceed, but his implied warranty, negligent misrepresentation, and common law fraud claims could not. The court dismissed a second consumer’s involvement because that consumer was a citizen of Vermont who did not allege that The Coca-Cola Company had any Illinois contacts related to his purchase of Fresca in Connecticut (Letoski v. The Coca-Cola Co., No. 1:23-cv-00238 (N.D. Ill. Oct. 11, 2024)).

Background. Two consumers, Fox and Letoski, brought a putative consumer class action alleging that The Coca-Cola Company (Coca-Cola) used deceptive and misleading labels to sell its Fresca black cherry and grapefruit flavors of sparkling soda water. The consumers said they understood “sparking water,” “soda water,” and similar terms to mean carbonated water without added sweeteners or flavorings; however, the ingredient list disclosed the artificial sweetener aspartame. The consumers also took issue with the fruit content they were expecting based on front label graphics. They alleged they would have paid less, or not bought the sodas at all, had they known about their true nature.

The consumers said they bought the Fresca products in Illinois and Connecticut, respectively, but Fox was a citizen of Vermont. The consumers claimed Coca-Cola violated the Illinois Consumer Fraud Act (ICFA), the Vermont Consumer Fraud Act (VCFA), and other state consumer protection statutes; breached implied and express warranties; negligently misrepresented its products; committed fraud; and, unjustly enriched itself. With respect to Fox’ claims, Coca-Cola moved to dismiss under Fed. R. Civ. P. 12(b)(2) for lack of personal jurisdiction. Coca-Cola otherwise moved to dismiss all of the claims under Fed. R. Civ. P. 12(b)(6) for failure to state a claim.

Consumer fraud. Applying the reasonable consumer standard, the court dismissed Letoski’s claim as to any representations about “flavoring;” however, with respect to the inclusion of the artificial sweetener aspartame, the court found Letoski nonetheless made a plausible claim that reasonable consumers expect “sparkling soda water” to mean an absence of sweeteners, real or artificial. The court analyzed all of the state consumer protection statutes together to the extent their core prohibitions were the same.

As to Letoski’s flavoring claims, he took issue with two things on the Fresca product labels: 1) the pictures of fruits on the front label and the description of the product as “sparkling soda water;” and, 2) the description of the product as “sparkling soda water.”

As for the pictures of fruits, Letoski conceded that the preemptive Food, Drug, and Cosmetic Act (FDCA) food labeling regulations dictated that a “fruit vignette” is a representation to the primary characterizing flavor but not a guarantee of the presence of fruit ingredients. The court found both Fresca products complied with the FDCA flavor disclosure requirements where their labels appropriately disclosed the presence of “artificial” and “natural” flavors or else the phrase “with other natural flavors.” The court held the FDCA and implementing regulation 21 C.F.R. § 101.22(i)(1)(ii) expressly permitted the labeling in question and did not require anything more.

Letoski contested the size of the print in the lower corner of the cans, but the court said the text did not appear to be too small or too far apart from the other labels. The court opined that reasonable consumers would not understand representations about the characterizing flavors to refer to the amount of natural cherry or citrus ingredients. The court also held Letoski was attempting to impose labeling requirements beyond those required by the FDA. The court therefore dismissed Letoski’s claim about the “flavoring” representations.

However, the court reached a different result about inclusion of the artificial sweetener aspartame. The court agreed that Letoski adequately pleaded that reasonable consumers might understand “sparkling soda water” as lacking any sort of sweetener. He mainly relied on a repealed FDA standard of identity defining “soda water” as lacking flavoring or sweetening. Coca-Cola countered that “soda water” made no representation about the presence of non-nutritive sweeteners, and, in any event, the FDA had repealed the standard Letoski cited and had declined to impose the suggested labeling requirement of “artificially sweetened [sparkling] soda water.”

The court said that although Letoski could not rely on the repealed standard, he still had a plausible claim because his allegation of how a reasonable consumer would understand “sparkling water” or “soda water” was not fanciful or unreasonable as a matter of law. The court said that was enough, at this stage, for the plaintiff consumer to rely on personal perception and one other consumer’s take on it. Benson v. Fannie May Confections Brands, Inc., 944 F.3d 639, 647 (7th Cir. 2019).

Coca-Cola objected that no reasonable consumer would read “soda water” to mean plain carbonated water in the context of other labeling that made it clear the product included fruit flavoring. The court replied it was not clear as a matter of law that the labeling here would have dispelled a reasonable consumer’s expectation, if any, that the product did not have any sweetener. The court reasoned that flavoring and sweetening could mean different things, just as flavoring does not promise a real fruit ingredient.

Coca-Cola pressed that the ingredient list showed “aspartame” and included the corresponding FDA-required disclosure about phenylalanine, but the court responded that a back-label disclosure does not necessarily immunize a defendant’s front-label claim. Bell v. Publix Super Markets, Inc., 982 F.3d 468, 477 (7th Cir. 2020). The court concluded the dispute here ultimately presented a question of fact for trial. The court offered that consumer surveys or other market research might ultimately show that the Letoski and Fox perceptions were not those of reasonable consumers.

Warranties. Coca-Cola argued the express warranty claims failed because there was no allegation of an express affirmation of fact, only an implied representation; however, the court agreed with Letoski that the statement “sparkling soda water” plausibly affirmed the products did not contain sweetener, the alleged basis of Letoski’s bargain, whereas they actually contained aspartame. The court said that was sufficient to state a claim for breach of express warranty.

As to the implied warranty claim, Letoski did not allege the ordinary purpose of the products or how they were unfit. The court accordingly dismissed the implied warranty claim.

Negligent misrepresentation. The court held that Illinois barred recovery for loss under a negligence theory where, as here, the complaint only alleged economic loss. This case did not encompass the exception for professional malpractice claims where a defendant’s work is intangible. The court declined to construe Coca-Cola’s role in the carbonated drinks market as creating an extra-contractual duty to provide non-deceptive information to consumers. The court dismissed Letoski’s negligent misrepresentation claim accordingly.

Fraud. Letoski did not allege common-law fraudulent intent on his common-law fraud claim. The court distinguished how ICFA intent was different in that it only required that a defendant intend that a plaintiff rely on deception. There was no suggestion here that Coca-Cola knew that “sparkling soda water” was a false statement. The court dismissed Letoski’s common law fraud claim accordingly.

Unjust enrichment. The court held that Letoski’s request for restitution for unjust enrichment survived to the same extent as the ICFA claim survived. The court noted that unjust enrichment is not an independent cause of action in Illinois, so it would have failed if the ICFA claim had failed.

Personal jurisdiction. The court held it lacked specific personal jurisdiction over Coca-Cola with respect to Fox’ claim. Fox was a citizen of Vermont who bought the Fresca products in Connecticut. Fox did not allege that Coca-Cola had any Illinois contacts related to his Fresca purchase in Connecticut. The consumers argued Bristol-Myers was irrelevant because it relied on mass tort principles. Bristol-Myers Squibb Co. v. Superior Ct. of California, San Francisco Cnty., 582 U.S. 255, 262 (2017). The court disagreed. The court said the complaint required a connection between the defendant, the forum state, and the underlying controversy as a prerequisite for specific personal jurisdiction, regardless of subject matter. A named class member like Fox had to show specific personal jurisdiction. Fox did not show that, so the court dismissed his claim.

The Case is No. 1:23-cv-00238.

Judge: Shah, M.

Attorneys: Spencer Sheehan (Sheehan & Associates, PC) for Mark Letoski. Jane Metcalf (Patterson Belknap Webb & Tyler LLP) for The Coca-Cola Co.

Companies: The Coca-Cola Co.

Cases: Advertising StateUnfairTradePractices IllinoisNews