On August 15, 2023, a panel of judges for the United States Court of Appeals for the Ninth Circuit revived a class action lawsuit against Nestle regarding its “Premier White Morsels” Toll House product.  In the opinion, Prescott v. Nestle USA, No. 22-15706, the court vacated the district court’s ruling and asked the court to reconsider its decision in light of the California Court of Appeal’s decision in Salazar v. Walmart, Inc., 83 Cal. App 5^th 561 (2022).

Plaintiffs alleged that Nestle violated California state law, including the Unfair Competition Law (“UCL”), Consumer Legal Remedies Act, and False and Misleading Advertising Law by misleading consumers into believe its Toll House “Premier White Morsels” product contained white chocolate.

The district court granted Nestle’s motion to dismiss, holding that plaintiffs failed to state a claim under California’s reasonable consumer test as a matter of law and failed to allege standing to seek injunctive relief.  However, the district court was applying California substantive law. The district court made the decision before the California Court of Appeal had made its decision in Salazar, and the panel found that because the Salazar case involved materially identical facts, claims, and arguments, that decision should have been considered. In Salazar, the appellate court held that a trial court erred in sustaining Walmart’s demurrer without leave to amend in a case regarding white chocolate in baking products under the UCL. The trial court found that no reasonable consumer would believe that Walmart’s “Great Value White Baking Chips” contained white chocolate.

The Salazar court found that plaintiff’s complaint plausibly alleged under the reasonable consumer test that "a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled" by Walmart’s White Baking Chips' advertising. The court held that a demurrer could only be granted in rare situations and was not resolvable at the pleading stage.

The Ninth Circuit panel reviewed the district court’s order and vacated the ruling and remanded for further proceedings in order for the district court to consider the appellate court’s ruling in the Salazar case.

Although the Prescott decision is unpublished, it continues a trend of making false advertising claims under California state law difficult to resolve on a motion to dismiss or demurrer. This increases the litigation costs to resolve even frivolous claims.