Judge Koh in the Northern District of California recently issued a strong ruling in favor of Chobani, Inc. on a motion to reconsider her prior ruling on Chobani’s motion to dismiss. Kane v. Chobani, Inc., No. 5:12-cv-02425-LHK, 2013 U.S. Dist. LEXIS 134385 (N.D. Cal. Sept. 19, 2013). The Court dismissed the plaintiffs’ claim that use of the term “evaporated cane juice” was false and misleading because plaintiffs failed to allege a plausible theory of reliance.
Reliance: Perhaps the most important ruling in the Chobani decision is that a plaintiff must allege reliance for all three prongs of the Unfair Competition Law (UCL). The plaintiffs had argued that because Chobani’s products were allegedly misbranded in violation of FDA regulations, the products were not capable of being sold legally. As such, plaintiffs argued, there was no need to allege that they had actually relied on the misrepresentations. Judge Koh disagreed with this “illegal product” theory and held that it would “eviscerate the enhanced standing requirements imposed by Proposition 64 and the California Supreme Court’s decision in Kwikset.” Judge Koh also rejected plaintiffs’ allegation that Chobani was required to disclose the “fact of Defendant’s alleged non-compliance with labeling laws,” finding that plaintiffs had failed to allege facts giving rise to a duty to disclose.
ECJ Claims: Judge Koh reversed her prior decision regarding Chobani’s evaporated cane juice (ECJ) claims. In her initial ruling on Chobani’s motion to dismiss, she held the plaintiffs had alleged a plausible theory of reliance based on the theory that they believed ECJ was healthier than other refined sugars and syrups. But the plaintiffs had actually not pled that theory in the complaint, and to the extent they tried to assert a slightly different theory—that ECJ was some type of ingredient that was healthier than sugar in general—the court found that theory was not plausible. The plaintiffs acknowledged in their complaint that dried cane syrup was a form of sugar, so it was implausible that they would not know evaporated cane juice was a sugar as well. Moreover, they did not allege what they believed ECJ to be, if not sugar. As such, she dismissed the ECJ claims with leave to amend.
Unpurchased Products: The plaintiffs purchased several flavors of Chobani Greek Yogurt, but also sued over products they didn’t purchase, such as other flavors of the same yogurt and Chobani Greek Yogurt Champions yogurts. Judge Koh ordered the plaintiffs to provide a table setting forth the products in the suit, the representations on each product, and which representations were misleading for which product. She also held that the plaintiffs’ allegations regarding reliance for unpurchased products failed for the same reasons set forth above regarding the purchased products. She additionally found that the allegations of reliance failed because the plaintiffs failed to adequately allege substantial similarity among the various products. Judge Koh dismissed claims against the unpurchased products with leave to amend.
Takeaway: Defense counsel should take note of Judge Koh’s ruling, particularly if they represent clients defending ECJ claims. In combination with Judge Gonzalez-Rogers’ decision dismissing virtually identical ECJ claims out of deference to the FDA under the doctrine of primary jurisdiction, Hood v. Wholesoy & Co., No. 12-cv-05550-YGR, 2013 U.S. Dist. LEXIS 97836 (N.D. Cal. July 12, 2013), there is strong support for dismissal of these claims.