Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Misleading product-packaging allegations failed to meet heightened pleading requirements, (Sep 27, 2013)

By Edward L. Puzzo, J.D.

Complaints of misleading claims on Welch Foods product packaging were insufficient to meet the heightened pleading requirements for allegations of fraud, the federal district court in San Jose, California has ruled (Park v. Welch Foods, September 26, 2013, Grewal, P.).

Elizabeth Park, representing a class, alleged that Welch Foods violated the California Unfair Competition Law and California False Advertising Law in presenting misleading claims on its product packaging and web site, including statements such as “No sugar added” on its 100% grape juice products containing concentrated fruit juice, “All natural” on its natural spread containing manufactured ingredients, “No artificial flavors” on jelly containing high-fructose corn syrup and “High in antioxidants” on its white grape beverages.

Welch Foods moved to dismiss Park’s claims on the grounds that the complaint failed to meet the heightened pleading requirements of Fed. R. Civ. P. 9(b) applicable to allegations of fraud. The court agreed.

Heightened pleading requirements for fraud allegations. Allegations of fraud must be accompanied by ‘the who, what, when, where, and how’ of the misconduct charged, as well as the circumstances indicating fraudulent conduct, the court stated. The claims must allege an account of the time, place, and specific content of the false representations as well as the identities of the parties to the misrepresentations, the court continued. The plaintiff must set forth what is false or misleading about a statement, and why it is false.

Under the heightened pleading standards, Welch Foods is entitled know specifically when and where plaintiffs purchased the particular Welch food products at issue and how their purchase decisions were driven by the alleged misrepresentations on the packaging labels.

Other than the ‘who,’ the court stated, the plaintiffs’ allegations failed to meet the heightened requirements of Rule 9(b). Their complaint summarized food labeling regulations and set forth conclusory allegations of unlawfulness. The court agreed with Welch’s allegation that plaintiffs’ complaint contained portions “generously and blindly appropriated from similar complaints filed in this district.” The plaintiffs claimed that Welch’s misrepresentations were part of an extensive labeling, advertising, and marketing campaign, but they failed to allege that they personally saw or relied upon any misleading advertisements or website statements in particular. The plaintiffs failed to allege when during the class period, where, and how many times they purchased the products in question or were exposed to the alleged misrepresentations.

Consequently, the court ruled that the pleadings failed the heightened pleading requirements required under Rule 9(b) for fraud allegations, and dismissed the claims with leave to amend.

The case is Civil Action No. 5:12-cv-06449-PSG.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Elizabeth Park. Ricky Lynn Shackelford (Greenberg Traurig LLP) for Welch Foods, Inc.

Companies: Welch Foods, Inc.

Cases: Advertising StateUnfairTradePractices CaliforniaNews