Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—N.D. Cal: Purchasers of Chobani yogurt lack standing to assert deceptive labeling claims, (Sep 23, 2013)

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

Purchasers of Chobani yogurt lacked standing to bring California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA) claims regarding Chobani’s allegedly misleading labeling of the yogurts, the federal district court in San Jose has ruled (Kane v. Chobani, Inc., September 19, 2013, Koh, L.). The court’s ruling on Chobani’s motion for reconsideration of a previous decision permitting certain of the claims to proceed was without prejudice, although the purchasers were not allowed to replead unjust enrichment and warranty claims.

The purchasers alleged that they bought six flavors of Chobani’s “Chobani Greek Yogurt.” They claimed that Chobani mislabeled those and other yogurt products in violation of the UCL, FAL, CLRA, Song-Beverly Consumer Warranty Act, and Magnuson-Moss Warranty Act, and that Chobani obtained unjust enrichment.

Specifically, the purchasers asserted that Chobani employed the term “evaporated cane juice” (ECJ) to refer to the sweetener in the yogurts when the sweetener was merely “sugar” or “dried cane syrup.” They alleged that the use of the term violated Food and Drug Administration regulations requiring manufacturers to refer to ingredients by their “common and usual names,” and establishing a Standard of Identity for Yogurt which did not list ECJ as an approved sweetener.” The purchasers also challenged claims on Chobani’s website that its products did not contain “extra sugar,” and that it did not “add sugar to our yogurt,” as false, misleading, and in violation of FDA labeling requirements. Finally, the purchasers alleged that Chobani falsely stated that its yogurts contained “only natural ingredients” and were “all natural,” when they contained artificial ingredients, flavorings, and colorings, as well as chemical preservatives. However, the only specific ingredient the purchasers identified was the use of “fruit or vegetable juice” as a coloring agent.

On July 12, 2013, the court issued an order denying Chobani’s motion to dismiss as to the purchasers’ UCL, FAL, and CLRA claims regarding Chobani’s use of the term “evaporated cane juice” to describe the sweetener employed in the yogurts. However, the court dismissed without prejudice the purchasers’ claims regarding products they did not purchase, claims regarding the statements that the yogurts had no added sugar and were “all natural,” and claims based on Chobani’s alleged violation of the FDA’s Standard of Identity for Yogurt, and dismissed with prejudice the unjust enrichment and warranty claims. Following this decision, the court granted Chobani’s motion for leave to file a motion for reconsideration concerning “(1) the court’s characterization of plaintiffs’ ECJ theory, and (2) whether the doctrine of primary jurisdiction should apply to preclude plaintiffs’ ECJ claims,” and vacated the July 12 order.

Standing

Evaporated cane juice claims. The court concluded that the purchasers lacked standing to assert their claims regarding Chobani’s use of the term “evaporated cane juice” because they did not sufficiently allege their reliance on Chobani’s alleged misrepresentations. The court found that the purchasers did not allege sufficient facts demonstrating that they believed the yogurts contained “only natural sugars from milk and fruit” and did not contain added sugars. The court noted that the purchasers referred to sugar and “dried cane syrup” interchangeably throughout their complaint, but did not explain how they could have known that “dried cane syrup” was a form of sugar, but could nonetheless have believed that “evaporated cane juice” was not. The purchasers also failed to allege what they believed “evaporated cane juice” to be if not a form of sugar.

In its July 12 order, the court had found that the purchasers had adequately pled reliance by alleging that Chobani’s use of the term “evaporated cane juice” had “plausibly suggested that the product is healthier than refined sugars and syrups,” and that they would not have purchased the yogurts had they known that ECJ was merely “white sugar or dried cane syrup (refined forms of sugar with little nutritional value.”

However, at a later hearing the purchasers disavowed that theory, and the court found their second amended complaint (SAC) did not clearly articulate it. Although the purchasers’ opposition to the motion for reconsideration also claimed to disavow the theory, it still contended that the SAC adequately pled reliance based on the purchasers’ belief that “ECJ was some type of ingredient that was healthier than sugar.” The court found that this argument was merely a “restatement” of the theory that the purchasers believed the yogurts only contained “natural sugars from milk and fruit,” which the court had already found to be “implausible,” and that in any case the “some type of ingredient that was healthier” theory of reliance did not appear in the SAC.

No sugar added claims. The purchasers also failed to plead reliance with respect to Chobani’s website statements that it did not add sugar to its yogurt. The relevant laws typically required plaintiffs to establish reliance by alleging that they had viewed the defendant’s advertising, and the court observed that the purchasers had not alleged that they viewed Chobani’s website.

The court rejected the purchasers’ argument, based on the California Supreme Court’s 2009 decision in In re Tobacco II Cases, 46 Cal. 4th 298, that they did not have to allege that they viewed the website because the statements on the website were part of a “long-term advertising campaign.” The court noted that In re Tobacco II did not “stand for the proposition that a consumer who was never exposed to an alleged false or misleading advertising or promotional campaign” could bring a claim for relief, but rather stood for the proposition that a plaintiff was not required to “plead with an unrealistic degree of specificity the particular advertisements or statements” on which he or she relied.

Here, the purchasers had not alleged that they were exposed to Chobani’s advertising, or any similar statements, nor had they alleged anything close to the “decades-long campaign of deceptive advertising” alleged in In re Tobacco II. The court also rejected the purchasers’ argument that they could establish reliance because the labeling violated FDA requirements, and they would not have purchased the yogurts if they had known the yogurts could not be sold legally. The court noted that permitting this theory would allow purchasers who had never viewed the defendant’s advertising to have standing, a result the court found “inconsistent” with the applicable standing requirements.

All natural claims. The court also concluded that the purchasers did not show reliance on Chobani’s statements that the yogurts contained “only natural ingredients” and were “all natural.” The court noted that the yogurts’ labels explicitly disclosed that Chobani had added “fruit or vegetable juice concentrate” for color, and therefore the purchasers could not plausibly have believed that the yogurts did not contain added fruit juice based on the “only natural ingredients” and “all natural” statements.

Products not purchased. The purchasers did not have standing with respect to products that they did not purchase, according to the court. Although the purchasers alleged that Chobani’s misrepresentations were similar across all products, the court found that the purchasers failed to demonstrate that the products they did not purchase were “substantially similar” to those that they did.

Unjust enrichment and warranty claims. Finally, the court dismissed with prejudice the purchasers’ claims for unjust enrichment and violation of warranty laws, because California does not have a cause of action for unjust enrichment, because the Song-Beverly Consumer Warranty Act does not cover warranties concerning “consumables,” and because the Magnuson-Moss Warranty Act only applies to products that cost more than five dollars and does not recognize product descriptions such as “all natural” as warranties.

The case is No. 12-CV-02425-LHK.

Attorneys: Ben F. Pierce Gore (Pratt & Associates) for Katie Kane. Dale Joseph Giali (Mayer Brown LLP) for Chobani, Inc.

Companies: Chobani, Inc.

Cases: StateUnfairTradePractices CaliforniaNews