Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—NDCal: Hershey May Be Liable For Misleading Labeling, (Nov 13, 2012)

By Jody Coultas, J.D.

A Hershey product purchaser stated California consumer protection law claims against The Hershey Company based on allegedly false and misleading labeling and advertising regarding the health benefits of its products, according to the federal district court in San Jose (Khasin v. The Hershey Company, November 9, 2012, Davila, E.).

The purchaser alleged that Hershey falsely advertised and labeled several of its products in violation of the California Unfair Competition Law and Consumers Legal Remedies Act. Hershey allegedly made unlawful nutrient content, antioxidant, health, and sugar free claims and failed to abide by the standards of identities for its chocolate and cocoa products.

Federal Preemption

Federal law did not preempt the purchaser’s state law claims, according to the court. Hershey argued that the claims were preempted by the Food, Drug, and Cosmetic Act (FDCA), as amended by the 1990 Nutrition Labeling and Education Act (NLEA) because the federal law precluded a private actor from enforcing these laws and the FDA regulations and that the state laws imposed different requirements from or in addition to federal laws and regulations.

State consumer protection laws are preempted if they seek to impose requirements that contravene the requirements set forth by federal law. However, courts have refused to find that preemption precludes the private, state-based causes of action, and complying with the demand requested by the purchaser would not require Hershey to undertake food labeling or representations different from the provisions of the FDCA or the rules and regulations promulgated by the FDA.

Standing

Hershey’s argument that the purchaser lacked standing to assert the claims was rejected by the court. A plaintiff must allege facts showing an injury-in-fact, causation, and redressability such that the injury will be likely redressed by a decision in the plaintiff’s favor in order to have standing. An injury in fact is an invasion of a legally protected interest which is concrete and particularized and actual or imminent, not conjectural or hypothetical. The purchaser alleged that he would not have purchased the products in question had Hershey not made the misrepresentations and had the products been properly labeled and that he lost money or property when he purchased the products in question because he did not receive the full value of those products as advertised and labeled due to the alleged misrepresentation.

The purchaser’s claims met the heightened pleading standard of Federal Rule of Civil Procedure 9(b) and withstood Hershey’s motion to dismiss. Questions of fact existed as to the allegations of fraud and misrepresentation did not render the pleadings inadequate for the purposes of the motion to dismiss.

The case is No. 5:12-CV-01862 EJD.

Ben F. Pierce Gore (Pratt & Associates) for Leon Khasin. William Lewis Stern (Morrison & Foerster LLP) for The Hershey Company.

Cases: StateUnfairTradePractices CaliforniaNews