In re 100% Grated Parmesan Cheese Marketing & Sales Practices Litigation
Docket: 16 C 5802; MDL 2705
Court: District Court, N.D. Illinois; August 24, 2017; Federal District Court
Defendants in a multidistrict litigation are companies that produce grated parmesan cheese products labeled as "100% Grated Parmesan Cheese" or similar variants. Plaintiffs claim these labels are misleading because the products contain additional ingredients, notably cellulose. Following the consolidation of these lawsuits, plaintiffs filed five class action complaints alleging violations of state consumer protection laws, breaches of express and implied warranties, and unjust enrichment. Defendants moved to dismiss the complaints under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). The court denied the motions regarding subject matter jurisdiction (Rule 12(b)(1)) but granted the motions to dismiss for failure to state a claim (Rule 12(b)(6)).
In evaluating the motions, the court assumed the truth of the factual allegations in the complaints but not the legal conclusions. It considered relevant documents and additional facts consistent with the pleadings. The defendants, including Kraft Heinz Company, Albertsons, Supervalu, Target, Wal-Mart, ICCO-Cheese, and Publix, are involved in various stages of the design, manufacture, and marketing of the cheese products, all of which prominently feature the "100% Grated Parmesan Cheese" label. Additionally, Kraft has invested in advertising campaigns reinforcing the claim that the products consist solely of real cheese.
Plaintiffs, consumers who purchased products from Defendants at grocery stores, believed they were buying items that contained only cheese. However, these products included cellulose, an organic filler with no nutritional value, ranging from 3.8% to 8.8% depending on the brand. Additional ingredients included potassium sorbate and corn starch. Each product's label included a list of ingredients that disclosed these non-cheese components, but the ingredient lists were less prominent than the "100% Grated Parmesan Cheese" labeling on the front. The cellulose was added to prevent caking, as noted on the packaging. Defendants are seeking dismissal of the case on two grounds: lack of Article III standing and failure to state a claim. They argue that Plaintiffs have not adequately demonstrated the necessary components of standing, specifically injury and causation, as required by the Supreme Court. The court must first assess standing before addressing the merits of the case.
Plaintiffs must establish they have experienced a concrete and particularized injury that is directly linked to the challenged conduct and can be remedied by a favorable court ruling, as outlined in *Hollingsworth v. Perry*. They claim financial injuries due to purchasing a product that contains non-cheese ingredients, asserting it is worth less than the price paid, and that the misleading label indicating it is "100% cheese" resulted in receiving a product of lesser value. The precedent set in *In re Aqua Dots Products Liability Litigation* supports their standing; in that case, parents of children who experienced no physical injuries were still deemed to have standing due to financial losses incurred by overpaying for a dangerous toy. The Seventh Circuit ruled that financial injury constitutes standing, which is echoed in other cases such as *Muir v. Playtex Prods. LLC* and *Gonzales v. Pepsico, Inc.*, where plaintiffs alleged they paid a premium based on false representations. If the plaintiffs can demonstrate that they relied on misleading labels, this provides a sufficient basis for their claims of injury and causation related to their financial losses.
Complaints assert that Plaintiffs have established an injury-in-fact that is concrete, particularized, traceable to Defendants' actions, and redressable by the court. Defendants' arguments regarding standing are deemed irrelevant, as they merely challenge the merits of the case. Albertsons and Supervalu argue that Plaintiffs’ injuries are speculative based on label compliance with FDA regulations, while Target and ICCO claim lack of causation since the labels do not explicitly promise "100% cheese." However, these are not standing issues but rather disputes over the substance of the claims. The court clarifies that to demonstrate standing, a plaintiff must present a colorable claim, not necessarily prove a right has been violated.
Plaintiffs assert claims under various state consumer protection laws, including the Alabama Deceptive Trade Practices Act, California Consumers Legal Remedies Act, and others, totaling several statutes from different states. All these laws share a common requirement that a plaintiff must allege conduct likely to deceive a reasonable consumer. The court notes that the relevant state laws necessitate proof that the disputed statement is likely to mislead consumers, which aligns with established precedents indicating that such claims can be substantiated by demonstrating the likelihood of consumer deception.
The court in Suchanek v. Sturm Foods, Inc. established that the determination of whether a "reasonable consumer" could be misled is a common issue for a proposed class of Alabama consumers under state consumer protection law. Similar principles apply to New Jersey consumers, as referenced in relevant case law. To succeed in consumer fraud claims, plaintiffs in New York and California must demonstrate that deceptive advertisements are likely to mislead a reasonable consumer. The Florida Deceptive and Unfair Trade Practices Act (FDUTPA) defines deception as any representation or omission that could mislead a reasonable consumer. Various cases apply the "reasonable consumer" standard when evaluating claims under different state consumer protection laws, including the Minnesota Consumer Fraud Act (MPCFA) and the Missouri Merchandising Practices Act (MMPA). The standard necessitates assessing whether representations made could reasonably mislead consumers based on the information available. Courts emphasize that an act is deceptive if it creates a likelihood of deception or has the capacity to mislead a reasonable consumer. The evaluation of advertisements must focus on their potential impact on a reasonable consumer, requiring a showing that a significant portion of the public could be misled under normal circumstances, rather than mere possibilities of misunderstanding.
To succeed in consumer fraud claims, Plaintiffs must demonstrate that the deceptive advertisements were likely to mislead a reasonable consumer. Deception is defined as a representation, omission, or practice likely to mislead a consumer to their detriment, requiring proof of probable deception rather than mere possibility. An advertisement is not deemed "false and deceptive" simply because it may be misinterpreted by a small, unrepresentative group. While deceptiveness is generally a factual question unsuitable for early dismissal, the primary evidence in such cases is the advertisement itself, allowing courts to rule, as a matter of law, that an advertisement would not mislead a reasonable consumer.
The evaluation of whether a consumer would be misled by an advertisement must consider the totality of information available to the consumer, including the context of the packaging. This context is critical; even if a statement appears ambiguous in isolation, the presence of disclaimers or clarifying language can negate claims of deception. If a plaintiff argues that certain packaging aspects are misleading, the court must assess whether any ambiguity can be clarified by the overall context.
In a comparison of cases, if misleading elements exist but are countered by clear disclaimers, the ambiguity can be resolved, allowing the claim to be dismissed. Conversely, if the misleading aspects are not ambiguous, the claim may proceed. Specific examples illustrate that consumers might rely on representations like "Nothing Artificial" without checking ingredient lists, suggesting that such representations could reasonably be relied upon, particularly if that was the defendant's intent. Overall, the context of the promotion plays a significant role in determining whether any ambiguities can be dispelled or if the claim remains valid.
In Workman v. Plum Inc., the court ruled that the packaging of food products was not deceptive, as a reasonable consumer would not assume that the size of items depicted on the front directly correlated with their actual predominance in the product. The court emphasized that any ambiguity could be clarified by the ingredient list on the back panel. This principle was supported by previous cases where consumers were deemed unreasonable if they interpreted vague statements in a misleading manner when clear information was available on the packaging.
The specific case at hand involved the description "100% Grated Parmesan Cheese," which the court found ambiguous. It could imply that the product is entirely cheese or that the cheese is entirely grated. The ingredient list revealed the presence of non-cheese ingredients, indicating that reasonable consumers would need to check this list for clarity. The court noted that consumers expect ingredient lists to provide detailed information, and thus, could not claim deception when the labels clearly disclosed the contents.
The plaintiffs attempted to argue that the case involved affirmative misrepresentation rather than ambiguity, but the court pointed out multiple reasonable interpretations of the label, with the plaintiffs’ interpretation being the least plausible. Additionally, the shelf-stable nature of the product indicated to reasonable consumers that it could not be pure cheese, which typically requires refrigeration. Overall, the court concluded that the defendants’ labeling and marketing were not misleading when considered in their entirety.
The plaintiff argues that the packaging of orange juice implies it contains 'fresh squeezed' juice, which is countered by the common understanding that products with a future expiration date cannot be fresh. Even if the juice was initially fresh, it loses that status by the time it reaches the store shelf. The plaintiff further claims that the packaging of crackers suggests they are healthy and contain a significant amount of vegetables, as they are marketed with phrases like "made with real vegetables." However, it is reasonable for consumers to recognize that crackers are not primarily made of fresh vegetables. The plaintiff asserts that consumers should not be expected to understand the role of cellulose in shelf life or the processing of grated cheese. Nonetheless, it is argued that consumers would naturally suspect that a shelf-stable cheese product could contain additional ingredients beyond cheese, as indicated by the ingredient label. The document also references a case, Williams v. Gerber Products Co., where deceptive marketing claims were upheld due to misleading representations on packaging that could easily mislead a reasonable consumer. The argument concludes that consumers should not have to look past deceptive front-label claims to find the truth in the ingredient list, contrasting with a prior district court ruling.
Williams establishes that deceptive actions by a defendant cannot be mitigated by fine print revealing the truth. In this case, the defendants’ claim is ambiguous, making Williams inapplicable. Courts have distinguished Williams as pertaining solely to affirmative misrepresentations, as seen in Workman and Manchouck. Contextual factors in Williams favor a finding of deception, as the plaintiffs there sought healthy snacks for young children and were misled by claims about the nutritional benefits of a product. Conversely, the context in this case, particularly regarding the shelf stability of cheese products, suggests a lack of deception. Several courts have dismissed UCL claims post-Williams, particularly when a consumer reads a true statement yet disregards known facts. Additionally, the Gubala case involved a clear misrepresentation regarding protein content, which is not paralleled here with the label "100% Grated Parmesan Cheese." Plaintiffs’ express warranty claims fail for similar reasons; a reasonable consumer would not interpret the labels as promising solely cheese content. The success of these claims hinges on whether consumers could read the statements as specific representations of cheese content, which they cannot, given the objective view of the labels.
Plaintiffs' claims regarding express warranties and implied warranties of merchantability are challenged on the grounds that the product labels clearly state that the grated cheese contains cellulose as an anticaking agent. Defendants argue that plaintiffs cannot assert warranties based on subjective interpretations that disregard the ingredient list. The court emphasizes that the key issue is whether plaintiffs' belief that the products contained only cheese was objectively reasonable, concluding it was not. As a result, express warranty claims fail, as they require that a reasonable consumer could interpret the product label as a promise of containing no non-natural ingredients. Florida courts treat express warranties as contracts, interpreting them according to general contract principles and considering the entire label. The term "100% Grated Parmesan Cheese" is deemed ambiguous and cannot be taken in isolation, needing context from the ingredient list.
Similarly, plaintiffs' implied warranty claims fail because the product labels do not reasonably suggest the products contain only cheese. Defendants assert that their products are fit for ordinary use as grated cheese, and the complaint does not allege that the products are unfit for consumption. Plaintiffs argue that the products do not meet the label's promise of being "100% cheese," citing cases that allowed implied warranty claims for food products that fell short of label promises. However, the court finds that the grated cheese was of merchantable quality and suitable for its intended use, undermining the plaintiffs' claims.
Plaintiffs' claims based on the implied warranty of merchantability are dismissed because the product labels do not promise that the product contains only cheese. The court references prior case law indicating that a warranty of merchantability guarantees a minimum level of quality, but does not ensure the product meets all consumer expectations. The labels were not misleading, and thus, the plaintiffs did not adequately present an implied warranty claim.
Regarding unjust enrichment, plaintiffs must demonstrate that defendants unjustly retained a benefit to their detriment, violating principles of justice and equity. Plaintiffs argue that defendants misrepresented their products as "100% grated cheese," but the court finds that this characterization is unreasonable since no deception occurred. The absence of actionable deception undermines both the fraud and unjust enrichment claims. The court cites additional cases affirming that non-deceptive advertising cannot form the basis for unjust enrichment.
Consequently, defendants' motions to dismiss are granted, and the complaints are dismissed without prejudice, allowing plaintiffs until September 14, 2017, to amend their complaints. If no amendment is made by the deadline, the dismissals will convert to dismissals with prejudice. Defendants must respond to any amended complaints by October 5, 2017.
