In recent years, California retailers and product manufacturers have been inundated with consumer class action lawsuits.  Because the question of whether a given product’s label and related representations are false or misleading is often fact-intensive, many cases survive a challenge at the pleading stage. As a result, some companies have opted for early settlement rather than risk lengthy (and expensive) litigation. However, the California Court of Appeals recently issued a decision that may provide defendants with another argument for dismissal at the pleading stage.

In Simpson v. Kroger[1], plaintiff alleged that the defendant’s butter was mislabeled because it included canola oil and/or olive oil among its ingredients, and therefore was not “butter.” Plaintiff asserted claims for unfair competition in violation of California Business and Professions Code Section 17200 (“UCL”), false advertising in violation of California Business and Professions Code Section 17500 (“FAL”), and violation of the California Consumer Legal Remedies Act (“CLRA”). The trial court dismissed the case, and the California Court of Appeal affirmed.

On appeal, plaintiff offered two arguments: (1) defendant’s “spreadable butter” products — which contained canola and/or olive oil — were falsely marketed and mislabeled as “butter,” in violation of federal and state law; and (2) defendant was liable under state and federal law because the oils in defendant’s spreadable butter were not identified with requisite prominence on the labels. According to plaintiff, the over-prominence and conspicuousness of the word “butter” on the label was misleading because it would lead consumers to believe that defendant’s product was actually standard butter.

The appellate court rejected both contentions.

First, addressing preemption, the appellate court affirmed that the federal Food, Drug and Cosmetic Act preempts plaintiff’s claims that defendant’s spreadable butter was misleadingly labeled under California’s Milk and Milk Products Act. The court also held, however, that plaintiff’s mislabeling claims under the California Sherman Food, Drug, and Cosmetic Law were not preempted by federal law.

Second, the appellate court held that, notwithstanding the preemption analysis, plaintiff’s UCL, FAL, and CLRA claims still failed. The Court of Appeal held that (a) a plaintiff must establish that consumers were likely to be deceived by the product; (b) in certain circumstances, a court can say, as a matter of law, that “contrary to the complaint’s allegations, members of the public were not likely to be deceived or misled by… packaging materials; ”[2] and (c) that “plaintiff has not, and as a matter of law cannot, allege that a reasonable consumer would have been mislead by the labels here.”[3]

More specifically:

The labels on the products here clearly informed any reasonable consumer that the products contain both butter and canola or olive oil. This was plain on both the top and side panels of the tubs in which the products are sold. No reasonable person could purchase these products believing that they had purchased a product containing only butter.[4]

While Simpson does not foreclose plaintiffs from bringing false advertising claims, the potential for dismissing UCL, FAL, and CLRA claims at the pleading stage has been enhanced and is indeed a positive development for consumer class action defendants. It remains to be seen how often, and in what circumstances, other courts are willing to follow Simpson.

Notes:
[1] __ Cal.App.4th ___ (Sept. 25, 2013), available at http://www.courts.ca.gov/opinions/documents/B242405.PDF

[2] Slip op. at 18 (citing Day v. AT&T Corp. 63 Cal.App.4th 325, 333 (1998)).

[3] Id. at 17.

[4] Id. at 19.