Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Consumer unfair competition claims proceed over Crisco oil labeling, (Aug 26, 2013)

By Tobias J. Gillett, J.D., LL.M.

A purchaser of Crisco Pure Vegetable Oil sufficiently alleged claims under California’s Consumers Legal Remedies Act (CLRA), under California’s Unfair Competition Law (UCL), and for breach of express warranty over J.M. Smucker Co’s allegedly misleading labeling of its bioengineered and chemically processed oils as “All Natural,” the federal district court in San Francisco has ruled (Parker v. J.M. Smucker Co., August 23, 2013, Conti, S.).

J.M. Smucker Co. manufactures a variety of food products, including Crisco Pure Vegetable Oil, made from soybean oil; Crisco Pure Canola Oil, made from rapeseed oil; Crisco Pure Corn Oil, made from corn oil; and Crisco Natural Blend Oil, made from combined rapeseed, sunflower, and soybean oil.

According to the purchaser’s complaint, Smucker labeled its oils as being “All Natural,” even though they were made with genetically modified crops, and were “so heavily processed that they bear no chemical resemblance to the ingredients from which they were derived.” The purchaser alleged that industry, government, and health organization definitions of bioengineered crops all characterized them “as having been scientifically altered to combine one plant’s genetic material with another’s in ways that do not occur naturally.” The purchaser further alleged that “over 70% of U.S. corn, over 90% of U.S. soy, and over 80% of U.S. canola crops are G.M.”; that Smucker sources its ingredients from suppliers that provide GM crops; that Smucker stated that its oils could contain GM ingredients due to their increased use by farmers and commingling of ingredients in storage and shipment; and that therefore Smucker must be using non-natural or GM crops in its oils.

The purchaser also alleged that Smucker treated its oils “with harsh, potentially harmful chemicals that render the oils less like natural oils extracted mechanically and more like unnatural chemical composites.”

The purchaser asserted claims under the CLRA, under the UCL, and for breach of express warranty. Smucker filed a motion to dismiss.

Pleading. The court found the purchaser had pled her allegations with sufficient particularity and plausibility. The court rejected Smucker’s argument that the purchaser had only alleged that it was highly likely that the oils contained non-natural ingredients, not that they actually contained them, because her allegations were sufficiently plausible at that stage of the litigation. Moreover, the purchaser sufficiently “describe[d] the who, what, when, where, and how of the allegedly misleading conduct,” and did not “need to set out scientifically precise descriptions of how the oils’ chemical makeup changes.”

Standing. The purchaser also had standing to pursue her claims as to the Canola Oil, Corn Oil, and Natural Blend Oil, even though she only purchased the Vegetable Oil, according to the court. The court observed that “the critical inquiry seems to be whether there is sufficient similarity between the products purchased and not purchased.” Here, the oils were “all the same kind of product,” they all had “highly similar labels,” and the purchaser alleged “the same actionable conduct as to each of them.”

Preemption. The court declined to follow Smucker’s argument that the purchaser’s claims were preempted because they conflicted with FDA policies on bioengineered foods and with federal food labeling regulations. The court rejected Smucker’s contention that, based on the FDA’s refusals to require the disclosure of bioengineered ingredients or to further define the term “natural,” the purchaser sought “to impose new and different labeling standards for products that may have bioengineered ingredients,” in a manner preempted by federal law. Instead of seeking to require different labeling of bioengineered foods, the purchaser merely asserted that Smucker’s inclusion of the phrase “All Natural” was misleading, a theory that was not preempted.

A similar analysis applied to Smucker’s contention that “because the FDA requires food producers to label ingredients according to their common or usual names, and the FDA does not require bioengineered ingredients to be so labeled, [Smucker] would violate FDA regulations if it referred to the oils' ingredients as, for example, ‘bioengineered soy.’” The purchaser did not imply that Smucker “should have labeled the product differently, just that it should not have included a certain label that is allegedly false or misleading.”

State law claims. The purchaser stated a claim under the CLRA and a claim under the UCL based on a violation of California’s False Advertising Law (FAL). Under the “reasonable consumer standard,” which applied to claims under the CLRA, UCL, and FAL, the purchaser had to “show that members of the public are likely to be deceived.” The court declined to follow Smucker’s argument that the purchaser had not plausibly shown “why any alleged presence of bioengineered ingredients in the oils would render the ‘All Natural’ statement misleading in light of FDA policy on bioengineered ingredients and the term ‘natural.’” The court found the argument to be “too attenuated” and reliant “on mischaracterizations of [the purchaser’s] claims.”

Moreover, the court declined to find as a matter of law that all consumers would understand that “packaged, non-organic foods may contain bioengineered ingredients” and that the only way to completely avoid bioengineered ingredients was to buy certified organic products. The purchaser merely alleged that “a reasonable consumer would read the ‘All Natural’ label, assume that such a product contains no bioengineered or chemically altered ingredients, and would then be misled if the product did in fact contain such things.”

The court also found that the purchaser adequately alleged a claim for breach of express warranty because “All Natural” was “an affirmative claim about a product’s qualities,” and did not “amount to mere puffery because it is not outrageous and generalized.” The court noted that California law provides an exception to the general rule requiring privity in warranty actions for claims arising from affirmative representations made on labels.

Primary jurisdiction. The court also found that dismissing the complaint under the primary jurisdiction doctrine would not be appropriate in the present case. The FDA had consistently declined to rule on “natural” labeling, despite repeated requests to do so, and therefore even if the doctrine applied “referring the matter to the FDA would do little more than protract matters.”

The case is No. C 13-0690 SC.

Attorneys: Leslie E. Hurst (Blood Hurst & O'Reardon LLP) for Diana Parker. Dean N. Panos (Jenner & Block LLP) for J.M. Smucker Co.

Companies: J.M. Smucker Co.

Cases: StateUnfairTradePractices Advertising CaliforniaNews