With the "reasonable consumer" standard satisfied, the dispute over Nestle's diabetes-related health claims goes back to District Court

On December 13, 2023, a three-judge panel of the Ninth Circuit overturned the District Court's dismissal of Nestle Healthcare Nutrition Inc.'s consumer false advertising claims and remanded the case to the District Court for further proceedings. The products under scrutiny are BOOST Glucose Control beverages by Nestle. The product labels contain three relevant representations, according to the Ninth Circuit:

• The product name is "Glucose Control,"
• The label statement that the product is "designed for people with diabetes," and
• The label claim that the product "helps manage blood sugar."

The plaintiffs allege that these claims, when taken together with product placement on shelves, misled customers by implying that the products controlled glucose and had an "affirmatively therapeutic impact on their blood glucose levels or otherwise mitigate, treat, or prevent pre-diabetes or diabetes."

The District Court rejected the plaintiffs' position. It concluded that the labels on the bottles, describing the products as "balanced nutritional drinks" and displaying the "number of carbohydrates and grams of sugar each drink contains in large print on the front of the label," show that the products "are a food that will necessarily impact glucose levels, not a health supplement or a drug that would treat the chronic disease."

Reversing, the Ninth Circuit found that the three representations taken together are "sufficient to show that a reasonable consumer could expect the product to exert some benefit on the control and regulation of blood sugar." That is, "a reasonable consumer could understand these representations to indicate that the product will have a positive effect on diabetes and blood sugar levels."

The Ninth Circuit rejected Nestle's "contrary interpretations of the product labels," noting that such disagreement cannot be resolved on a motion to dismiss. Boosting the Ninth Circuit's decision were the allegations that the product was placed in stores next to diabetes treatment products and health supplements. Relying on the Ninth Circuit's decision in Moore, the Court said that "the products' placement in stores alongside legitimate diabetes treatments may create a 'contextual inference[]' that the product may have a positive effect on the regulation of blood sugar." See Moore v. Trader Joe's Co., 4 F.4th 874, 882 (9th Cir. 2021).

Article III Standing Dismissal Was Reversed

The Ninth Circuit also reversed the District Court's dismissal for lack of Article III standing.

The District Court held that plaintiffs had not sufficiently alleged Article III standing because, although they alleged that there was a price premium demonstrated on Nestle's website, "the plaintiffs themselves "do not state how much they paid for the BOOST drinks." Further, the named plaintiffs did not allege "how much they would have paid absent the allegedly deceptive labels."

The Ninth Circuit held that such detail was not necessary for pleading injury for Article III standing. It was sufficient that plaintiffs "allege[d] that they purchased a product they otherwise would not have bought but for defendant's alleged misrepresentations." Spending money you would not have spent is the "quintessential injury-in-fact" to support Article III standing, said the Ninth Circuit.

In addition, the plaintiffs' price premium allegations satisfied Article III standing. "Plaintiffs fairly alleged that BOOST Glucose Control has a higher price than other comparable products and that plaintiffs chose to pay the premium based on Nestle's alleged misrepresentations." In other words, the Ninth Circuit said it was not necessary that plaintiffs state the price they specifically bought the product for or the specific price premium they paid; the general allegations of a price premium suffices for Article III standing.

Takeaways

Although unpublished, this decision signals that the Ninth Circuit may seek to put strict boundaries around its recent decisions of Moore v. Trader Joe's Co., 4 F.4th 874, 882 (9th Cir. 2021), and McGinity v. The Procter & Gamble Company, No. 22-15080 (9th Cir. 2023).

According to McGinty, where the front of packaging is "ambiguous," information on the back of the package can be used to avoid a claim of misleading or deceptive packaging. Here, the arguably ambiguous claims were on the front of the package, similar to McGinty, but so was the nutritional information that the District Court found resolved any ambiguity.

A key distinguishing factor could be that the claims here bordered on impermissible claims that the product could treat diabetes (so-called "disease claims" because any such claims are limited to approved drugs). Moreover, a claim of "glucose control" is hardly ambiguous. It could just be that the District Court got it wrong. Nonetheless, additional cases will continue to flesh out the boundaries of McGinty and Moore.

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