Campbell v. Freshbev LLC

Citation: 322 F. Supp. 3d 330Docket: 1:16–cv–7119(FB)(ST)

Court: District Court, E.D. New York; July 2, 2018; Federal District Court

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Frederic Block, Senior United States District Judge, addresses a class action lawsuit filed by Gerard Campbell against Freshbev LLC, Freshbev, and Whole Foods Market Group, Inc., alleging the sale of juice products with misleading labels under New York General Business Law GBL 349 and 350, as well as common law fraud. The defendants have moved to dismiss Campbell's Third Amended Complaint (TAC) on grounds of lack of subject matter and personal jurisdiction and failure to state a claim. The court grants in part and denies in part the motion to dismiss.

Campbell claims to have purchased various Freshbev juices at Whole Foods for prices that reflected a premium based on several misrepresentations, including claims that the juices were unpasteurized, cold-pressed, fresh, and that the Cranberry Apple juice contained more cranberry than apple juice. The defendants argue that the court lacks personal jurisdiction over out-of-state class members based on the Supreme Court's decision in Bristol-Myers Squibb Co. v. Sup. Ct. of Cal., which ruled that state courts lack personal jurisdiction over claims by out-of-state plaintiffs against out-of-state defendants without a connection to the forum. The court notes that it is unclear whether this principle applies to federal courts or nationwide class actions and will defer addressing this issue until Campbell files a motion for class certification.

Regarding standing for injunctive relief, the defendants contend that Campbell lacks standing because he is now aware of the true nature of the juices and cannot be deceived again. To establish standing for injunctive relief, a plaintiff must show a concrete injury that is traceable to the defendant's conduct and likely to be remedied by a judicial decision. Some courts have ruled that once a plaintiff becomes aware of misrepresentations, they cannot claim a future threat of harm. Conversely, other courts, including a recent Ninth Circuit decision, have determined that plaintiffs can maintain standing if they express a future intent to purchase the product.

In Davidson v. Kimberly-Clark Corp., the Ninth Circuit determined that a consumer had standing for injunctive relief due to ongoing injury from relying on a misleading product label. This injury was deemed actual and imminent because the consumer could not trust the label as long as the product remained on the market, affecting future purchasing decisions. The court found the Davidson case persuasive but noted that the plaintiff in this case failed to demonstrate a similar future injury, as he did not express intent to repurchase the product. Consequently, his claims for injunctive relief were dismissed.

The plaintiff challenged four aspects of the product labeling: claims of being unpasteurized, cold-pressed, fresh, and the implication regarding the cranberry content in the Cranberry Apple juice. The defendants argued that federal law preempted these claims and asserted the accuracy of their labels. Under Federal Rule of Civil Procedure 12(b)(6), the complaint must present sufficient facts to establish a plausible claim. For deceptive advertising claims under GBL 349 and 350, a plaintiff must show consumer-oriented conduct, material misleading, and resultant injury.

The plaintiff contended that the label 'unpasteurized' was misleading because he equated high pressure processing (HPP) to pasteurization. However, the defendants argued that FDA regulations distinguish between pasteurization and HPP, thus allowing the 'unpasteurized' label. The Supremacy Clause invalidates state laws that conflict with federal laws, and the FDCA empowers the FDA to regulate food labeling, with the NLEA explicitly preempting state labeling requirements that differ from federal standards. Additionally, the FDA provided guidance for safe juice treatment practices, further informing the regulatory landscape.

The Guidance interprets the FDA's January 19, 2001 Final Rule on juice safety, establishing a HACCP process for juice manufacturers aimed at controlling pathogens. HACCP is a flexible framework requiring processors and importers to implement safety measures, primarily through pasteurization, defined as a heat treatment sufficient to eliminate pathogenic cells. An alternative method, high pressure processing (HPP), is categorized as a 'Non-Thermal Treatment' for juice. 

The Guidance addresses labeling issues, noting that manufacturers may voluntarily label products as 'pasteurized' or 'unpasteurized' if done truthfully. However, labeling a product as 'unpasteurized' could mislead consumers unless it clarifies the method of treatment, as it could imply the presence of harmful pathogens. For products treated with methods achieving a 5-log pathogen reduction, the 'unpasteurized' label is deemed non-misleading if additional information is provided. 

In this case, the Cranberry Apple and Pineapple juices have labels that indicate they were treated with pressure, making the 'unpasteurized' label accurate. Conversely, the Cranberry juice label lacks this explanation, potentially misleading consumers; thus, the plaintiff has sufficiently pleaded claims under GBL 349 and 350 regarding this label.

Additionally, the plaintiff contends that the 'cold-pressed' label is misleading, as the juices undergo HPP after cold-pressing. The plaintiff defines cold-pressing as shredding produce and applying hydraulic pressure to extract juice. The claim suggests consumers would assume nothing beyond cold-pressing occurs. However, this interpretation is considered implausible.

The absence of modifiers such as 'only' or 'exclusively' before 'cold-pressed' indicates that consumers would not assume the juice was processed without any pressure. As a result, claims regarding this labeling are dismissed. The plaintiff also contests the defendants' use of the term 'fresh' on the product label. According to 21 C.F.R. 101.95, 'fresh' implies that a food is raw and unprocessed, which excludes products treated with High Pressure Processing (HPP). Defendants argue that the regulation allows for 'fresh' to be used if it does not imply unprocessed status, referencing pasteurized milk as an example. However, juice, which is marketed both processed and unprocessed, cannot be labeled 'fresh' without misleading consumers. The defendants' argument that additional language about 'pressure' would clarify the term 'fresh' is insufficient, as the term is inherently misleading. The Cranberry label lacks clarification regarding pressure and thus cannot avoid liability. Whether consumers are misled by the combination of 'fresh' and additional language remains a factual question.

Additionally, the plaintiff challenges the 'Cranberry Apple' label, arguing it suggests a greater cranberry content than apple, while the ingredient list shows the opposite. Defendants contend that the name does not indicate juice proportions and that any confusion can be corrected by the ingredient list. However, per 21 C.F.R. 102.33(b), juice names must list ingredients in descending order of predominance unless specified otherwise. The label fails to do this by listing cranberry before apple and lacks a 'flavored' disclaimer. Consequently, this mislabeling could lead reasonable consumers to mistakenly believe there is more cranberry juice than apple.

Plaintiff asserts a common law fraud claim against defendants, focusing specifically on the absence of an 'unpasteurized' warning label on certain juice products sold by Whole Foods. Defendants contest the plaintiff's standing and the sufficiency of the fraud claim, arguing that the plaintiff has not demonstrated a misleading statement by Whole Foods that would connect the alleged injury to its actions. The court first examines the standing issue, noting that the plaintiff claims Whole Foods failed to label its juices as 'unpasteurized,' while labeling its own unpasteurized products. This allegation grants the plaintiff standing.

However, the court finds that the plaintiff has not adequately stated a fraud claim under New York law, which requires specific elements including a material misrepresentation, intent to defraud, and reasonable reliance by the plaintiff. The plaintiff's assertion that Whole Foods is fraudulently misrepresenting the juice as unpasteurized is deemed illogical, as Whole Foods's omission of the warning label does not imply such a representation. The court points out that Whole Foods's lack of an unpasteurized sticker may be justified by the High Pressure Processing (HPP) treatment, which obviates the need for the label.

Consequently, the court dismisses the plaintiff's common law fraud claim and his request for injunctive relief. Claims related to 'cold-pressed' and 'unpasteurized' labels on specific juices are also dismissed. However, the plaintiff is permitted to pursue claims under New York General Business Law (GBL) §§ 349 and 350 concerning the 'fresh' and 'Cranberry Apple' labels, as well as the 'unpasteurized' label on the Cranberry juice. The court notes that the plaintiff is a New York citizen, Whole Foods is a Delaware corporation, and the case involves potential class members with over $5 million in controversy. The plaintiff's argument hinges on Whole Foods's control over its private label products, which is sufficient for preliminary pleading purposes, although the extent of this control will be clarified during discovery. Confusion arose during oral arguments regarding which specific labels were implicated.

The Court will defer addressing defendants' challenges to the plaintiff's class action claims until class certification is presented. The existence of out-of-state class members does not impact subject matter jurisdiction due to minimal diversity between the named plaintiff and defendants. If the out-of-state class is dismissed, the plaintiff must prove that the damages threshold of $5 million is achievable solely with in-state plaintiffs. The case Nicosia v. Amazon.com, Inc. is not applicable here, as it involved a situation where the defendant ceased selling the product, negating the potential for future injury, a claim the plaintiff has not alleged.

For General Business Law (GBL) § 350 claims, reliance must be pleaded, which the plaintiff has done. The FDA mandates a 5-log reduction in pathogens for effective pathogen control, a standard referenced in the context of a proposed rule that became final on July 9, 1998. The defendants submitted a graphic of the product label post-oral argument, which includes a disclaimer regarding pressure. However, the Court is limited to the complaint's content under Rule 12(b)(6) and can consider the full label only during summary judgment.

The plaintiff's analogy comparing grapes, vinegar, and wine is ineffective; cold-pressed juice is the same product whether treated with high-pressure processing (HPP) or not. Labels for Cranberry Apple and Pineapple juice clarify that pressure treatment was used, potentially alleviating consumer confusion. Defendants' new argument that FDA regulations cannot be considered because they do not create a private right of action contradicts their own reliance on these regulations in their briefs.

New York law prohibits food misbranding in a manner similar to the Federal Food, Drug, and Cosmetic Act (FDCA), and state labeling requirements are not preempted by federal regulations. The Court must evaluate the FDA regulations to determine if the plaintiff's claims are preempted, as misleading claims on product labels can suggest a reasonable consumer might be misled. While 21 C.F.R. 101.95(c) provides exceptions, none apply in this case, particularly regarding misleading labeling as it relates to pasteurization.

The ingredient list on product packaging does not absolve manufacturers from liability for misleading front-label claims. Whole Foods offers a separate line of unpasteurized juices with explicit health hazard warnings, which are not part of this lawsuit. Dismissal for lack of subject matter jurisdiction due to the inadequacy of a federal claim is appropriate only if the claim is insubstantial or implausible. The plaintiff's allegation of fraudulent conduct by FreshBev based on patent application statements was abandoned in opposition and fails to meet the Rule 9(b) specificity requirement for fraud pleading.