Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal.: Organic beverage consumers successfully reopen “evaporated cane juice” litigation, (Jul 3, 2014)

By Greg Hammond, J.D.

Consumers in a class action suit against beverage manufacturer Santa Cruz Natural Inc. have successfully reopened their case and received a stay in lieu of dismissal. In partially granting the consumers’ motion to alter or amend an order of dismissal without prejudice, the federal district court in San Francisco determined that dismissal would disadvantage the consumers and staying the action would be a more appropriate action (Swearingen v Santa Cruz Natural Inc., July 1, 2014, Illston, S).

Background. Mary Swearingen and Robert Figy filed a class action suit against Santa Cruz, alleging that the beverage manufacturer’s use of the term “organic evaporated cane juice” (ECJ) on the label of various Sodas, juice boxes, and limeade and lemonade products violated Food and Drug Administration (FDA) regulations and California’s Sherman Law. Their complaint alleged multiple causes of action under California’s Unfair Competition Law, False Advertising Law, and Consumer Legal Remedies Act, among other claims. The district court previously dismissed the complaint without prejudice, applying the doctrine of primary jurisdiction. However, the consumers filed a motion to alter or amend the order of dismissal, asserting that the court erred in (1) applying the doctrine of primary jurisdiction and (2) dismissing the action without prejudice rather than staying the action.

Primary jurisdiction. In support of its motion to alter or amend, the consumers first argued that the question of whether the use of the ECJ term on food labels is allowable is not a question of first impression with the FDA and there are no complicated issues that require the special competence of the agency. However, the court determined that both of their arguments were already made in opposition of the motion to dismiss or could have been made prior to the entry of the order. Because Federal Rule of Civil Procedure 60(b) cannot be used to relitigate old matters or raise new arguments that could have been presented prior to judgment, the court denied the consumers’ motion to alter or amend as it related to the court’s application of the doctrine of primary jurisdiction.

Case reopened. The consumers next argued that dismissal of the case would disadvantage them and that staying the action would be appropriate. In light of the potential prejudice to the consumers and the lack of prejudice to Santa Cruz, the court reconsidered its decision to dismiss the action. Specifically, it found that staying the action in lieu of dismissal would be appropriate because: (1) there is a strong likelihood the statute of limitations could expire prior to the FDA’s issuance of a final guidance document; (2) the consumers were likely to lose a year or more off the class period; and (3) further judicial proceedings may be contemplated. Consequently, the court reopened the case and stayed the action pursuant to the doctrine of primary jurisdiction.

The case number is C 13-04291 SI.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Mary Swearingen. Robert B. Hawk (Hogan Lovells US LLP) for Santa Cruz Natural, Inc.

Companies: Santa Cruz Natural, Inc.

Cases: StateUnfairTradePractices Advertising CaliforniaNews