Chocolate Class Action Dismissed

A California federal court recently rejected a putative consumer class action alleging the defendant somehow misled customers about antioxidants in its chocolate and cocoa products.  See  Leon Khasin v. The Hershey Co., No. 5:12-cv-01862 (N.D. Calif. 3/31/15).

Plaintiff was a California consumer who, since 2008, allegedly purchased more than $25.00 of Defendant’s products, including Special Dark Chocolate, Milk Chocolate, Special Dark Kisses, Special Dark Cocoa, Natural Unsweetened Cocoa, and Sugar Free Coolmint IceBreaker Mints. Plaintiff originally made a host of claims about the marketing of these various products, but in motion practice the Court trimmed most of the claims in the suit, preserving only lead plaintiff's claim under California’s Unfair Competition Law that the statement “natural source of flavanol antioxidants” on some of the Hershey products was allegedly  "false and misleading."  

Hershey moved for summary judgment. First, Hershey argued that, to prevail on his UCL claim, plaintiff had to prove he was deceived by Hershey’s “natural source of flavanol antioxidants” statements. Second, Hershey contended that there was no evidence of class-wide deception because reasonable consumers would likely not have been misled by Hershey’s statements. Third, Hershey claimed that there was no evidence that plaintiff suffered injury as a result of being deceived by Hershey’s statements. The Court agreed there was insufficient evidence that the “natural source of flavanol antioxidants” statement on the challenged Hershey products was likely to mislead reasonable consumers and that the label statements were therefore unlawful on that basis. 

The Court noted as background that the FDA has yet to promulgate a regulation defining the word “natural” as it pertains to packaged food. See Food Labeling: Nutrient Content Claims, General Principles, Petitions, Definition of Terms; Definitions of Nutrient Content Claims for the Fat, Fatty Acid, and Cholesterol Content of Food (“FDA Policy Statement”), 58 Fed. Reg. 2303, 2407 (Jan. 6, 1993) (explaining that “FDA is not undertaking rulemaking to establish a definition for ‘natural’ at this time.”). Instead, the FDA opted to “maintain its current policy . . . not to restrict the use of the term ‘natural’ except for added color, synthetic substances, and flavors as provided in [21 C.F.R.] § 101.22.” Id. “Additionally,” the FDA stated that “the agency will maintain its policy regarding the use of ‘natural,’ as meaning that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.” Id. 

Against that regulatory backdrop, plaintiff argued that the labels on the challenged Hershey products were (1) unlawful and (2) misleading. The Court noted that the UCL claim was governed by the “reasonable consumer standard,” which requires evidence that “members of the public are likely to be deceived” by the business practice or advertising at issue. Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir. 2008). Thus, to survive summary judgment, a plaintiff “must produce evidence showing ‘a likelihood of confounding an appreciable number of reasonably prudent purchasers exercising ordinary care.’ ” Clemens v. DaimlerChrysler Corp., 534 F.3d 1017, 1026 (9th Cir. 2008) (quoting Brockey v. Moore, 107 Cal. App. 4th 86, 99 (2003)). Put differently, plaintiff had to show “it is probable that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.” Lavie v. Procter & Gamble Co., 105 Cal. App. 4th 496, 507 (2003).  Although surveys and expert testimony regarding consumer expectations are not required, “a few isolated examples of actual deception are insufficient” in the Ninth Circuit. Clemens, 534 F.3d at 1026. Moreover, under California law, a plaintiff cannot “obtain relief by arguing how consumers could react; [he] must show how consumers actually do react.” Zeltiq Aesthetics, Inc. v. BTL Indus., Inc., 13-cv-05473-JCS, 2014 U.S. Dist. LEXIS 40402, at *33 (N.D. Cal. Mar. 25, 2014).

Here, plaintiff testified that he was misled by Hershey’s “natural source of flavanol antioxidants” label. According to Khasin, he believed at the time of purchase that flavanol antioxidants made them a “better choice” than other products. He produced evidence he said showed that flavanol antioxidants are not known to provide health benefits. Hershey maintained that its product labeling was not false and did not mislead consumers because its products in fact retain flavanol antioxidants that are naturally found in the cocoa bean. There was evidence that plaintiff also understood that Hershey’s products are candy, not health foods. 

Here, Khasin’s evidence was insufficient to create a genuine dispute of material fact.  While plaintiff argued that he was “mislead” by the label “natural source of flavanol antioxidants” and the “implicit representation[s]” that the FDA has established a Recommended Daily Intake (“RDI”) or Recommended Daily Value (“RDV”) for flavanol antioxidants, his solitary testimony, without more, was not enough to survive summary judgment. “[A] few isolated examples of actual deception are insufficient” to survive summary judgment.” Clemens, 534 F.3d at 1026; see also Ries v. Arizona Beverages USA, No. 10-CV-00139, 2013 WL 1287416, at *7 (N.D. Cal. Mar. 28, 2013) (granting summary judgment where defendants’ owner testified that some consumers of AriZona Iced Tea “were confused by the term a hundred percent natural” because such testimony, without more, “does not demonstrate that it is probable that a significant portion of the consuming public could be confused by the ‘all natural’ labeling of defendants’ products.”). Thus, absent additional evidence in addition to his own testimony, plaintiff did not meet his burden on the question of deception.

Moreover, even if the Court were to accept this testimony as evidence of deception, the facts in the record spoke to the contrary. Plaintiff in fact had testified in his deposition that Hershey’s products are candy, not health foods. And he didn't know what an RDI was.  In any event, plaintiff had to provide other extrinsic evidence in addition to his allegations to prove whether a reasonable consumer was likely to be misled. See Rice v. Fox Broad. Co., 330 F.3d 1170, 1181-2, n. 8 (9th Cir. 2003); but he produced no extrinsic evidence to suggest that a reasonable consumer would have expected or assumed that any particular level of flavanol antioxidants would be found in the alleged Hershey products. There was insufficient evidence presented such that the Court could find that a reasonable consumer would be misled by Hershey’s statements.

Further, “not every regulatory violation amounts to an act of consumer fraud.” See Mason v. Coca-Cola Co., 774 F. Supp. 2d 699, 705 n.4 (D.N.J. 2011).  Plaintiff''s showing of FDA letters regarding the characterizing level or amounts of nutrients was not relevant to showing that consumers are likely to be misled by Hershey’s statements.

Third, Khasin did not meet the burden of showing he suffered injury as a result of purchasing and relying on Hershey’s statements. Plaintiff was required to prove that he “lost money or property,” as a result of Hershey’s deceptive labeling to “demonstrate some form of economic injury.” Kwikset, 51 Cal. 4th at 322-23. Khasin proffered no evidence to show economic injury, but rather claimed that his purchases were “legally worthless” because they are inaccurate representations of what he thought he was purchasing. Alternately, he claimed that he paid a “price premium” because Hershey products with the statement, “natural source of flavanol antioxidants,” were objectively worth less than what he paid.  But the plaintiff's evidence did not include a model to determine how to calculate this presumed “price premium.”  Hershey produced historical sales data and a consumer survey indicating that there was no price change attributable to the labeling phrase, “natural source of flavanol antioxidants.” Therefore, plaintiff had not met his burden of showing that he suffered economic injury through loss of money or property, as a result of Hershey’s alleged deceptive labeling.


Therefore, the Court granted the defense motion.
 

 

No Purchase, No Standing

Earlier this month a federal court reaffirmed that a named class representative in a proposed consumer class action against Ghirardelli Chocolate Co. lacked standing to assert claims about products he never bought. See Miller v. Ghirardelli Chocolate Co., No. 12-04936 (N.D. Cal. 4/5/13). We have posted before about plaintiffs overreaching in consumer fraud class actions. If a tree falls and no one is there, does it make a sound? If you never bought and used a product, how can you bring a “consumer” claim?

Plaintiff Scott Miller allegedly bought a package of “Ghirardelli® Chocolate Premium Baking Chips –Classic White” and then, on behalf of himself and other consumers, sued the Ghirardelli
Chocolate Company, complaining that defendant somehow deceived customers into thinking that this and four other products contained “artificial” or “imitation” ingredients, in violation of United States Food and Drug Administration (“FDA”) and state regulations.

Readers may know that Ghirardelli is one of America’s longest continuously operating chocolate manufacturers (more than 150 years) and that it is one of very few American manufacturers that make chocolate starting from the cocoa bean through to finished products. Ghirardelli accepts
only the highest-quality beans, rejecting as many as 30% of the beans that are offered it. Ghirardelli roasts the cocoa beans in-house to ensure the company’s signature flavor profile is consistently maintained in all chocolate products.

Miller filed suit in San Francisco County Superior Court, and Ghirardelli removed to federal
court and moved to dismiss the complaint. The court initially agreed that Miller lacked standing for products he had not purchased. At oral argument, however, plaintiff argued that the branding on the label meant that – under the FDA regulations and standards – the alleged harm was identical across product lines, and that established standing as to products he never used. Miller filed an amended complaint and Ghirardelli again moved to dismiss.

Hard as it may be to believe, there are a few cases that suggest that a plaintiff who does not purchase a product nonetheless may have standing if the products and alleged misrepresentations were substantially similar. E.g., Astiana v. Dreyer’s Grand Ice Cream, Inc., No. C-11-2910 EMC, 2012 WL 2990766, at *11 (N.D. Cal. July 20, 2012). But certainly where the alleged misrepresentations or accused products are dissimilar, courts tend to dismiss claims to the extent they are based on products not purchased. E.g., Larsen v. Trader Joe’s Co., No. 11-cv-5188-SI (Docket No. 41) (N.D. Cal. June 14, 2012), the court found that the plaintiffs lacked standing to bring claims based on products they did not purchase (wide range of Trader Joe’s products (cookies, apple juice, cinnamon rolls,biscuits, ricotta cheese, and crescent rolls). See also Stephenson v. Neutrogena, No. C-12-0426 PJH, 2012 U.S. Dist. LEXIS 1005099, at *1 (N.D. Cal. Jul. 27, 2012) (plaintiff brought suit over six Neutrogena Naturals products but had only purchased the purifying facial cleanser).

Even under the Astiana approach, here the products were too different: they look different; they have different uses (baking chips, drink powders, and wafers); they have different labels and different representations on packaging, and they are marketed and sold differently in that, for example, some are sold alongside each other, and some are sold in commercial markets and others in consumer markets. The logo, which plaintiff put so much emphasis on, was relatively unimportant considering the varying products, packaging and representations, and markets. Logos cannot be dispositive of what a product is and that a consumer determines what a product or characterizing flavor is by reviewing the label. Finally, the identity of the commodity here under FDA regulations was “white chocolate,” not “chocolate” as in the logo. That in turn means that a determination of standing required an examination of the entire label, and again, the five products and the alleged misrepresentations were not sufficiently similar.