Last month, the Ninth Circuit, in an opinion scant on explanation, vacated the order of Judge Koh in the Northern District of California dismissing false advertising class action claims Chobani, LLC, the maker of Chobani Greek Yogurt.
The class action alleged that Chobani falsely advertised its yogurt in two ways: 1) by referring to the sweetener in the yogurt as “evaporated cane juice,” when it is really just “sugar” or “dried cane syrup” and 2) representing that the yogurts contain “[o]nly natural ingredients,” when they actually include artificial colors.
In February 2014, Judge Koh issued an opinion dismissing the complaint because Plaintiffs failed to allege facts sufficient to demonstrate standing to pursue UCL, FAL and CLRA claims. As explained by the court, in order to have standing to bring FAL and CLRA claims, a plaintiff must show reliance on an alleged misrepresentation as well as sustain an economic injury as a result of the misrepresentation. Importantly, the court also found that if claims are based on a “fraud theory involving false advertising and misrepresentations to consumers,” then claimed violations of UCL’s “unlawful” prong must be supported by actual reliance.
Regarding the “evaporated cane juice” claims, the Court, for the second time, found that plaintiffs failed to explain how they could realize that “dried cane syrup” was sugar, but not know that “evaporated cane juice” was sugar, since both phrases refer to “cane”. The court held it was simply not plausible that plaintiffs believed “evaporated cane juice” was not an added sugar, rejecting their reliance theory.
Similarly, the court reasoned that because the labels (which plaintiffs claimed to have read) “clearly disclosed the presence of fruit or vegetable juice concentrate in the yogurts for color, it is not plausible that Plaintiffs believed that the Yogurts did not contain added fruit juice for coloring purposes.” Although plaintiffs added an allegation that the fruit and vegetable juices were not themselves “natural” products, Judge Koh held this could not cure the reliance deficiencies since plaintiffs had not provided any facts justifying why the juices were “highly processed unnatural substances,” failing to plead their claims with the requisite particularity.
Because the reliance element was not met for any of plaintiffs’ claims (after the court gave them three chances to correct the problem), Judge Koh dismissed the case with prejudice.
Despite the lower court’s in depth analysis (and the multiple chances given to plaintiffs’ attorneys to get the pleadings right), the Ninth Circuit, in an unpublished opinion, flatly rejected the court’s ruling and vacated the order of dismissal. Surprisingly, the Ninth Circuit gave no justification for overturning Judge Koh’s ruling, simply stating that the order was vacated.
Instead, the Ninth Circuit used its opinion to discuss why the case must be stayed based on the doctrine of primary jurisdiction. The Court cited the FDA’s November 2015 request for comments regarding use of the term “natural” in connection with food product labeling, and the FDA’s July 2015 statement that it expects to issue final guidance on the term of “evaporated cane juice” by the end of 2016 as reasons why the case should be stayed and await further FDA input.
Despite the fact that the motion to dismiss was vacated, it seems clear that the Ninth Circuit did not necessarily take issue with Judge Koh’s 2014 ruling based on the points of law themselves, rather, was accounting for a change of circumstances with the announcement of forthcoming FDA guidance. However, particularly with regard to the FDA’s position on “natural” with respect to food labeling, the wait could be very long, as there is no time table for when (or even if) the FDA will issue formal determinations about the meaning of these terms.