brown and white sugar

Earlier this year, we discussed the Ninth Circuit’s decision staying a consumer class action against Chobani challenging its listing of “evaporated cane juice” as an ingredient on its yogurt labels. According to the plaintiffs in that case, “evaporated cane juice” was simply code for sugar, and Chobani therefore allegedly misled them about the healthiness of its products. The Ninth Circuit reasoned that a stay was necessary on primary jurisdiction grounds in order to allow the FDA time to complete its review of draft guidance on the use of the term. This decision was viewed as a temporary breather for food companies facing class actions challenging the use of the term. The Northern District of California’s recent decision in Swearingen v. Santa Cruz Natural, Inc., issued after the FDA published its final guidance, may signal a revival of such cases.

As in Chobani, the class action complaint in Swearingen – filed before the FDA issued its final guidance – alleges that soda products offered for sale by Santa Cruz were misleadingly labeled as containing “evaporated cane juice.” The Swearingen plaintiffs contend that the use of “evaporated cane juice” violates FDA regulations and California food labeling laws that require food labels to reflect the common or usual name of an ingredient which, as in Chobani, plaintiffs contend is sugar. The Swearingen complaint also asserted claims under California’s Unfair Competition Law (UCL), False Advertising Law (FAL) and Consumer Legal Remedies Act (CLRA), as well as claims for breach of warranty, negligence, and injunctive and declaratory relief.

Santa Cruz moved to dismiss the complaint but the district court, like the Ninth Circuit in Chobani, stayed the action. After the FDA issued its final guidance – which indicates that the term “evaporated cane juice” should be listed on food labels as “sugar” – the district court in Swearingen lifted the stay and granted in part and denied in part Santa Cruz’s motion to dismiss.

The court dismissed without prejudice plaintiffs’ negligence and negligent misrepresentation claims because the damages sought are purely economic and, therefore, are barred by the economic loss rule. The court also dismissed – with prejudice – plaintiffs’ breach of warranty claims for failing to give Santa Cruz the required statutory notice of breach and an opportunity to cure before filing suit.

Plaintiffs’ request for declaratory and injunctive relief were also dismissed on standing grounds because they failed to allege that they intend to purchase Santa Cruz’s soda products again. While the court gave plaintiffs leave to amend their complaint to try to remedy this pleading failure, it expressed doubts that plaintiffs could do so.

While the court also concluded that plaintiffs were barred from basing their claims on Santa Cruz soda products that did not list evaporated cane juice as an ingredient, the court permitted plaintiffs to pursue claims against products that did list that ingredient even if the named plaintiffs did not purchase those products. The court noted that courts within its own district “are split as to whether actual purchase is required to establish the requisite injury-in-fact” for standing. However, the court agreed with those decisions holding that, “where plaintiffs seek to proceed as representatives of a class . . . ‘the critical inquiry seems to be whether there is sufficient similarity between the products purchased and not purchased.” According to the court, the non-purchased soda products were sufficiently similar to the soda products purchased by the plaintiffs to give them standing to pursue claims based on both.

The court also concluded that plaintiffs had pled sufficient facts to satisfy the “reasonable consumer” test under California’s consumer protection laws, at least with respect to two of the products at issue. That test “‘requires a plaintiff to show potential deception of consumers acting reasonably in the circumstances — not just any consumers.'” According to the court, the two products that satisfied this standard – at least at the pleading stage – listed their sugar content at 29 and 25 grams respectively, and also listed “organic” purees and “juice concentrates” as ingredients. The court determined “that a reasonable consumer might think that these ingredients created naturally occurring sugars that comprised the sugar content of the beverage.”

However, the court had “reservations as to whether a reasonable consumer would be misled as regarding added sugars” in the other two products at issue, which listed sugar content of 35 and 32 grams respectively. According to the court, “[i]t is unclear that a reasonable consumer would believe that 35 [or 32] grams of sugar naturally occurs, as plaintiffs allege, in filtered water . . . juice, or other . . . flavorings.” Nonetheless, despite the court’s reservations, it declined to exclude these products at the motion to dismiss stage.

This decision may signal a revival of class action claims against food manufacturers for listing “evaporated cane juice” as an ingredient. However, as the Swearingen court noted, a plaintiff must plead – and, if they survive dismissal, later prove – reliance on that term in order to satisfy the standing requirements of the FAL, CLRA and the “unlawful prong” of the UCL.