In Morgan v. Wallaby Yogurt Co., Inc., the U.S. District Court for the Northern District of California denied defendant’s motion to dismiss a class action complaint alleging violations of the UCL, FAL, and CLRA for mislabeling yogurt products, but struck plaintiffs’ prayer for injunctive relief.  The Court held that plaintiffs had standing to bring the UCL, FAL, and CLRA claims, as well as standing to prosecute claims for products the plaintiff did not purchase.  Morgan provides companies with an insight into the standing threshold for class actions challenging food product labels.

Plaintiffs brought a class action complaint against Wallaby for allegedly “misbranding” their yogurt products by listing “evaporated cane juice” as an ingredient.  Plaintiffs alleged that they were unaware that Wallaby’s products contained added sugar when they purchased the yogurt, and that they would not have purchased it if they had known “evaporated cane juice” was a form of added sugar.  Wallaby brought a motion to dismiss the First Amended Complaint in its entirety.  Judge Orrick of the Northern District of California largely denied the motion to dismiss.

Plaintiffs’ Reliance Allegations Were Not Implausible

The court found plaintiffs had statutory standing under the UCL, FAL, and CLRA because plaintiffs alleged that they relied on misleading product labels and would not have purchased the products at the “premium” price if they had known that “evaporated cane juice” was, in fact, an added sugar.  The court also found that plaintiffs had stated claims under those statutes, finding plaintiffs’ allegations that they are health-conscious consumers who want to avoid “added sugar” but did not recognize “evaporated cane juice” as an added sugar, sufficient for the purposes of the motion to dismiss.

In so holding, Judge Orrick disagreed with Judge Koh’s holding in Kane v. Chobani, 12-CV-02425, 2013 U.S. Dist. LEXIS 134385 (N.D. Cal. Sept. 19, 2013), which held that plaintiffs lacked statutory standing and failed to state claims in a similar case against Chobani yogurt.  The Kane decision held that plaintiffs lacked standing because they failed to adequately plead reliance.  The Kane plaintiffs acknowledged that “dried cane syrup” was a form of sugar, but failed to allege how they could have simultaneously believed evaporated cane juice was not.  Morgan disagreed with Kane, noting that it did not find it “implausible” for the purposes of a motion to dismiss that a reasonable consumer would not equate “dried cane syrup” with “evaporated cane juice.”  Along the same lines, Morgan held that plaintiffs’ contention that a reasonable consumer would not recognize evaporated cane juice as a sugar was not so implausible that plaintiffs failed to state a claim as a matter of law.

Notably, Judge Orrick’s Morgan decision also conflicts with a later decision Judge Koh issued in Kane.  Kane v. Chobani, Inc., 12-CV-02425, 2014 U.S. Dist. LEXIS 22258 (N.D. Cal. Feb. 20, 2014).  In her September 19, 2013 order, Judge Koh granted the Kane plaintiffs leave to amend their complaint.  Plaintiffs did so, and Chobani moved to dismiss.  Judge Koh again rejected plaintiffs’ reliance theory and held that plaintiffs lacked standing, finding their contention that they believed “evaporated cane juice” was not an added sugar “implausible.”  Judge Koh dismissed the evaporated cane juice claims with prejudice.

Plaintiffs Had Standing for Products They Had Not Purchased

The court also held that plaintiffs had standing to assert claims based on products they had not purchased.  The court noted that the pertinent inquiry was whether there was a “substantial similarity” between the purchased and unpurchased products, and whether the resolution of the asserted claims “will be identical.”  Products are “substantially similar” where the same alleged misrepresentation is on the product labels, and the products are the same kind of food product.  The court found there was substantial similarity among the 17 Wallaby yogurt products with the evaporated cane juice label, because the challenged representations were the same, caused the same harm, and were unaffected by differences in ingredients.

Morgan did note two instances in which a plaintiff might not have standing for products they had not purchased.  First, a plaintiff may not have standing for unpurchased products where the claim that a reasonable consumer would be misled by a representation is dependent on a context-specific analysis of the label’s appearance or placement and the labels of the purchased and unpurchased products differ.  Second, a plaintiff may not have standing for unpurchased products where the composition or appearance of the product is legally significant to the claim.

Judge Orrick’s decision in Morgan both provides guidance on the issue of standing in labeling class actions, and demonstrates a divide within the Northern District of California.  Future decisions on these issues should be watched as the case law continues to develop.