Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Consumer claims of evaporated cane juice in yogurt products have standing, allowed to continue, (Mar 20, 2014)

By Melissa Skinner, J.D.

Claims that the use of the term evaporated cane juice in place of sugar in the ingredient list on yogurt products amounted to misbranding were allowed to continue over the yogurt manufacturer’s attempt to dismiss. The court found that consumers alleging misbranding claims for 17 different flavors of yogurt produced by the same manufacturer had statutory standing despite a recent similar case where consumers making almost identical claims regarding evaporated cane juice in yogurt were found not to have standing. While the court found that the consumers were not entitled to injunctive relief because they were now aware that evaporated cane juice was sugar, the court held that the consumers sufficiently pleaded claims for damages under California law against the yogurt manufacturer and could bring claims against products that were not actually purchased (Morgan v Wallaby Yogurt Co., Inc., March 13, 2014, Orrick, W).

Background. Consumers Frank Morgan and Janet Hood brought a suit on behalf of either a nationwide or California statewide class against Wallaby Yogurt Company, Inc. (Wallaby) alleging that the use of the term evaporated cane juice on its yogurt products constituted misbranding because the term was misleading and Morgan and Hood would not have bought Wallaby products if they had known the yogurt contained added sugars. After Morgan and Hood filed the initial complaint and Wallaby requested that the court dismiss that complaint, the court entered an order dismissing two counts of the complaint with prejudice and dismissing the other counts without prejudice. Subsequently, Morgan and Hood filed a first amended complaint (FAC) alleging: (1) violation of the “unlawful” prong of the California’s Unfair Competition Law (UCL); (2) violation of the “unfair” prong of the UCL; (3) violation of the “fraudulent” prong of the UCL; (4) misleading and deceptive advertising under California’s False Advertising Law (FAL); (5) untrue advertising under FAL; and (6) violation of California’s Consumer Legal Remedies Act (CLRA). Wallaby filed a motion to dismiss the FAC.

Standing. Since Morgan and Hood alleged that they were health conscious consumers that were misled by the labeling on the yogurt products and would not have purchased the yogurt if they would have known that evaporated cane juice was actually a form of added sugar, the court found Morgan and Hood had standing under the UCL, FAL, and CLRA. Wallaby argued that it was implausible that Morgan and Hood reasonable relied on the term evaporated cane juice. Despite the outcome in a similar and recently-decided matter, Kane v Chobani, Inc., the court found that it was plausible for Morgan and Hood to have known that dried cane syrup was sugar but not to have understood that evaporated cane juice was also sugar. In Kane, however, the court found it was implausible that the consumers would understand that dried cane syrup was sugar but not that evaporated cane juice was also sugar. While the court explicitly stated that this view has no bearing on the merits of the claim, the court held that the alleged lack of knowledge that evaporated cane juice was actually added sugar was sufficient to prove standing.

Other issues. Because Morgan and Hood admitted to now being aware that evaporated cane juice was sugar and, therefore, could not be said to be exposed to a real and immediate threat of repeated injury, the court found that they were not entitled to injunctive relief. However, Morgan and Hood’s claims under the UCL, FAL, and CLRA were allowed to continue because the court found there was a sufficient showing of evidence to establish they acted as a reasonable consumer would in relying on the listing of evaporated cane juice. Whether the term was actually misleading, however, was an issue of fact that was meant for a jury to decide, according to the court. Moreover, the claims based on yogurt products that Morgan and Hood did not specifically purchase were also allowed to continue because the court found the products were substantially similar, despite variances in flavor and ingredients, and that the challenged representation of the listing of evaporated cane juice instead of sugar and the alleged harms were the same was sufficient to overcome a motion to dismiss.

The case number is 13-cv-00296-WHO.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Frank Morgan. Kelly Marie Morrison (Jenner and Block LLP) for Wallaby Yogurt Co., Inc.

Companies: Wallaby Yogurt Co., Inc.

Cases: StateUnfairTradePractices Advertising CaliforniaNews