Antitrust Law Daily Wrap Up, ADVERTISING—NDCal: California Purchasers of Costco Food Products Failed to Allege Deceptive Labeling with Specificity, (Apr 11, 2013)

By William Zale, J.D.

Purchasers of Costco food products failed to state deceptive labeling claims under California law with the required particularity and also failed to state breach of warranty claims under federal and California law, the federal district court in San Jose has ruled (Thomas v. Costco Wholesale Corp., April 9, 2013, Davila, E.).

The purchasers maintained that the products’ packaging contained misrepresentations including unlawful or misleading nutrient content claims; claims about antioxidant content; "no sugar added" claims; health claims; "no trans fat" claims; "evaporated cane juice" claims; synthetic chemical content omissions; listing of product ingredients not in descending order of predominance by weight; and "preservative free" claims.

One of the two named plaintiffs in the putative class action complaint, who allegedly purchased at least eight Costco food products, established standing by alleging that she would not have purchased the products at issue had they been properly labeled. The other named plaintiff lacked standing because she failed to allege that the "no trans fat" potato chips she purchased contained trans fat, the court found.

The breach of warranty claims were dismissed with prejudice. Claims under California’s Song-Beverly Consumer Warranty Act failed because the Act did not apply to "consumables." Claims under the federal Magnuson-Moss Warranty Act failed because the food label statements did not constitute warranties against a product defect, according to the court.

The purchasers’ deceptive labeling claims under the California Unfair Competition Law, False Advertising Law, Consumers Legal Remedies Act did not satisfy the requirements of pleading with particularity under Rule 9(b) of the Federal Rules of Civil Procedure, the court determined. The purchasers used the generally defined term "Misbranded Food Products" throughout the complaint without referring to specific products. They did not clearly state which types of allegedly deceptive claims were made for which products. They failed to specify which products contained violations of cited sections of the California Health & Safety Code. It was unclear which specific products the purchasers purchased. The court dismissed the deceptive labeling claims with 15 days leave to amend.

The case is No. 5:12-CV-02908 EJD.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Karen Thomas. Amanda L. Groves (Winston & Strawn LLP) for Costco Wholesale Corp.

Companies: Costco Wholesale Corp.

Cases: Advertising StateUnfairTradePractices CaliforniaNews