Antitrust Law Daily Wrap Up, STATE UNFAIR TRADE PRACTICES—W.D. Tex.: State law claims that Whole Foods' yogurt was mislabeled preempted by federal law, (Feb 18, 2016)

By Edward L. Puzzo, J.D.

In multidistrict litigation involving claims that Whole Foods yogurt was mislabeled as to sugar content, consumers’ state law claims were preempted by federal food labeling law because the product testing used did not conform to the FDA's prescribed testing protocol, the federal district court in Austin, Texas has ruled (In Re: Whole Foods Market, Inc. Greek Yogurt Marketing and Sales Practices Litigation, February 16, 2016, Sparks, S.).

This multidistrict litigation involved 11 putative class action lawsuits brought against grocery retailer Whole Foods in connection with the sale and marketing of their house brand Greek yogurt "Whole Foods 365 Everyday Value Plain Greek Yogurt." Plaintiffs sought to represent a national class that purchased the product after August 1, 2010, and subclasses in 10 states who purchased the product between August 6, 2008 and October 10, 2012.

Plaintiffs alleged that the sugar content stated on the labels was misrepresented, in violation of consumer protection and unfair competition statutes in ten states. They claimed that inaccurate labeling gave Whole Foods a competitive advantage over supposedly higher sugar competitors, allowing Whole Foods to sell the product at a higher price, to the detriment of plaintiff consumers.

Preemption. Whole Foods moved to dismiss, alleging that plaintiffs' claims were preempted by the federal product labeling requirements contained in the Food, Drug & Cosmetic Act (FDCA) and Food and Drug Administration (FDA) regulations.

The Nutrition Labeling and Education Act (NLEA), amending the FDCA, was enacted in 1990 in order to create national standards for the labeling of food, the court explained, expressly preempting state or local food labeling requirements that were not identical to federal requirements. However, courts have repeatedly held that state laws that mirror the relevant sections of the FDCA were not preempted.

Under the FDCA, labeling regarding sugar content is considered misbranded if the actual sugar content, as measured by a specified methodology, is more than 20 percent higher than the stated sugar content. According to plaintiffs' allegations, the labeling on the yogurt stated that the product contained 2 grams of sugar per serving, but Consumer Reports testing showed that the actual sugar content was nearly six times that amount: 11.4 grams per serving. Whole Foods argued that the state law claims were preempted because plaintiffs' allegations did not use the methodology required by the FDCA. The court agreed.

By their own allegations, the court explained, plaintiffs sought to impose liability based on a testing methodology that was more burdensome than that provided for under the FDCA. Plaintiffs responded that the testing methodology was not a pleading requirement and their allegations regarding sugar content must be accepted as true for purposes of Fed. R. Civ. Proc. 12(b), with the determination as to the sufficiency of the evidence supporting this claim to be made at a later stage of the proceeding. To hold otherwise, plaintiffs argued, would impose an "impossible-to-meet" pleading standard because they could not obtain results compliant with the FDA protocol, absent formal discovery. But the court noted that the parties had been in discovery for months, and plaintiffs had had ample time to determine whether they could allege in good faith that the yogurt had a substantially higher sugar content than labeled, based on tests conducted in compliance with prescribed FDA testing methods.

It was not necessary to decide whether the FDA's testing methodology was a pleading requirement, the court continued, because plaintiffs' allegations relied solely on a Consumer Reports' analysis known to have not followed FDA protocols. These allegations could not be sufficient, because if permitted to proceed, the state law claims would impose liability inconsistent with the FDCA.

The court found no reason to excuse the plaintiffs from pleading a plausible violation of the FDCA, which they must do to avoid preemption. Consequently, the court ruled, plaintiffs' state law misbranding claims were preempted. The court dismissed the claims without prejudice, allowing plaintiffs the opportunity to amend.

The case is Civil Action No. A-14-MC-258-S [MDL. NO. 2581].

Attorneys: Ross H. Schmierer (Paris Ackmerman & Schmierer LLP) for Kevin Grodnick. Jay William Connolly (Seyfarth Shaw LLP) and John H. Hempfling, II, National Litigation Counsel, for Whole Foods Market, Inc., Whole Foods Market Group, Inc., and WFM Private Label, L.P.

Companies: Whole Foods Market, Inc.; Whole Foods Market Group, Inc.; WFM Private Label, L.P.; Skotidakis, Inc.

Cases: Advertising StateUnfairTradePractices TexasNews