Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—NDCal: Unfair Competition and False Advertising Claims Proceed Against Del Monte over Fruit and Vegetable Labeling, (May 16, 2013)

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

A putative class of purchasers of certain Del Monte vegetable and fruit products sufficiently alleged California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA) claims against Del Monte over its allegedly misleading labeling of the food products, the federal district court in Oakland, California has ruled (Kosta v. Del Monte Corp., May 15, 2013, Rogers, Y.). However, the court dismissed claims under California’s Song-Beverly Consumer Warranty Act and the federal Magnuson-Moss Warranty Act.

The purchasers’ claims were based on allegations that Del Monte mislabeled its "Fruit Naturals" fruit cups, "FreshCut" canned vegetables, and canned tomato products in violation of the federal Food, Drug and Cosmetics Act (FDCA) and California’s Sherman Act. The purchasers claimed that Del Monte attempted to mislead consumers into believing its pasteurized and chemically preserved fruit cups were actually fresh fruit by packing them in a manner similar to fresh fruit, placing them in the refrigerated sections of grocery stores and labeling them "Must Be Refrigerated," and failing to identify ingredients on the label as chemical preservatives.

The "FreshCut" vegetables were allegedly thermally processed and chemically preserved, despite stating that they were "Picked Fresh * Packed Fresh," were "Packed From Fresh," and contained "No Preservatives." In addition, the purchasers alleged that the tomato products contained calcium chloride or citric acid, both of which the FDA had stated could not be added to tomatoes labeled "natural." Further, certain statements regarding the lycopene or lutein content of the tomatoes were allegedly not permitted by the labeling regulations. The purchasers alleged that they relied on the labeling in buying Del Monte’s products.

Del Monte filed a motion to dismiss.

Preemption. The court first addressed Del Monte’s argument that the federal Nutritional Labeling and Education Act (NLEA) expressly preempted the purchasers’ state law claims. The court observed that courts that had previously ruled on similar claims had found "that state law claims are not preempted where the feed labeling requirements under state law are identical to their federal and NLEA counterparts," and that "[i]t is only where the requirements go beyond the FDA regulations that preemption comes into play."

Here, the Sherman Law "expressly adopt[ed] federal labeling requirements in their entirety." "While Del Monte may disagree with Plaintiffs as to both the meaning of the FDA requirements at issue here and whether its products conform to those requirements, that disagreement does not mean that Plaintiffs are trying to impose additional requirements beyond the FDA’s," the court observed. Therefore, the purchasers’ claims were not expressly preempted by the NLEA.

The claims were not impliedly preempted by Section 337(a) of the FDCA, which provides that only the United States may sue to enforce compliance with the FDCA and the NLEA. Del Monte relied on the Ninth Circuit’s 2012 decision in Pom Wonderful LLC v. Coca-Cola Co., 679 F.3d 1170, in which appellate court held that a plaintiff could not "maintain a Lanham Act claim that would require a court originally to interpret ambiguous FDA regulations, because and rendering such an interpretation would usurp the FDA’s interpretive authority," and that a plaintiff could not "sue under the Lanham Act to enforce the FDCA or its regulations because allowing such a suit would undermine Congress’s decision to limit enforcement of the FDCA to the federal government."

The court observed that the Pom Wonderful court had expressly limited its decision to the Lanham Act, and "did not analyze claims brought under a state law that mirrors the FDCA." Moreover, the NLEA explicitly permitted states to "pass and enforce their own labeling laws, so long as the state’s requirements are identical to those of the FDCA." Finding "no conflict between the state and federal law," the court therefore applied a presumption against preemption, and denied Del Monte’s motion to dismiss on preemption grounds.

Primary jurisdiction. The court also refused to stay or dismiss the case based on the doctrine of primary jurisdiction, which allows courts to stay or dismiss a case "pending the resolution of an issue within the special competence of an administrative agency." The purchasers were not "asking the court to create new requirements or interpret what the FDA might find, but only to enforce what the FDA and identical California law already require." Since adjudicating the claims would only require the court to determine whether Del Monte’s labels complied with FDA regulations, the court denied Del Monte’s motion to dismiss on abstention grounds.

Standing. The court declined to dismiss the case based on Del Monte’s argument that the purchasers lacked standing under both Article III and the California unfair competition laws because the plaintiffs had failed to plead injury-in-fact. The purchasers did not argue that Del Monte’s products themselves were defective, but rather than Del Monte’s labeling had "caused them to purchase products or pay premiums they would not have otherwise," and thus had alleged an economic injury. The purchasers’ allegations that "they paid a premium for Del Monte’s products which they otherwise would not have paid but for Del Monte’s misrepresentations" were sufficient to establish standing under both Article III and the California laws.

Failure to state a claim. The court also rejected Del Monte’s argument that the purchasers failed to state a claim under the UCL, FAL, and CLRA "because no reasonable consumer [was] likely to be deceived by [Del Monte’s] product labels." The court found it "plausible" that a reasonable consumer "would rely on ‘front of the package’ labeling claims like ‘fresh,’ ‘all natural,’ and ‘a natural source of antioxidants’ when selecting food products," and that a consumer would believe a container of fruit in the refrigerated product section labeled "Must Be Refrigerated" and with no identified chemical preservatives on its label to be fresh cut fruit.

However, the court dismissed the purchasers’ claims under California’s Song-Beverly Consumer Warranty Act because that law does not apply to "consumables" such as Del Monte’s food products. Moreover, the court concluded that the purchasers had failed to demonstrate that labeling claims such as those made by Del Monte could constitute warranties under the federal Magnuson-Moss Warranty Act.

Pleading with particularity. The court concluded that the purchasers had pled their unfair competition and false advertising claims with the particularity required by Federal Rule of Civil Procedure 9(b). The court observed that "the ‘who’ is Del Monte Corporation; the ‘what’ is Del Monte’s allegedly unlawful and deceptive claims in its labeling, packaging and website; the ‘when’ is ‘since 2008 and through the class period;’ and the ‘where’ is Del Monte’s package labels and website." Finally, the purchasers alleged "how" Del Monte’s claims were misleading by alleging that "(1) Del Monte violated the Sherman law in nine specific ways; (2) Plaintiffs purchased products while reasonably relying on Del Monte’s misrepresentations; and (3) Plaintiffs were deceived by Del Monte’s product labels and website."

Striking allegations. The court also rejected Del Monte’s attempt to strike under FRCP 12(f) the purchasers’ allegations regarding statements that they did not see and products they did not buy. The court observed the "[w]here the allegations indicate sufficient similarity between the products, any concerns regarding material differences in the products can be addressed at the class certification stage." The court found the purchasers’ references to certain individual products within a product line that they did not allege that they purchased, and to certain representations in Del Monte’s SEC report, store advertising, and website, were "sufficiently similar to those purchased and seen by Plaintiffs, and any concerns regarding the differences among the products at issue are better resolved at the class certification stage."

The case is No. 12-cv-01722-YGR.

Attorneys: Alex Peet (Lovelace Law Firm, P.A.) for Michael Kosta. William Lewis Stern (Morrison & Foerster LLP) for Del Monte Corp.

Companies: Del Monte Corp.

Cases: StateUnfairTradePractices Advertising CaliforniaNews