California Court Denies Stay of Consumer Class Action Challenging “Natural Cheese”

CheeseOn December 6, 2016, United States District Judge John A. Kronstadt for the Central District of California denied a motion to stay a class action alleging violations of the UCL, FAL, and CLRA against Kraft Foods Group, Inc. based on the term “natural cheese” on the packaging of its shredded cheddar cheese product, which allegedly contain artificial coloring. Morales, et al. v. Kraft Foods Group, Inc., et al., No. 2:14-cv-04387-JAK-PJW, Dkt. No. 273. The court declined to stay the case under the doctrine of primary jurisdiction pending the FDA’s rulemaking because any FDA regulation on the term “natural” would not be determinative of whether consumers were misled by the term “natural cheese.”

Consumers Challenge “Natural” Kraft Packaging. In May 2014, plaintiffs Claudia Morales and Mocha Gunaratna filed a class action lawsuit in Los Angeles Superior Court, seeking injunctive relief and damages under California’s UCL, FAL, and CLRA against Kraft Foods Group, Inc. Plaintiffs alleged that they were misled by the term “natural cheese” on the label of Kraft’s “Natural Cheese – Shredded Cheese – Cheddar Fat Free” and would not have purchased the product if they had known it contained artificial coloring. Kraft removed the action to the Central District of California on June 6, 2014.

FDA Considers “Natural” Rulemaking and Kraft Seeks Stay. In 1993, the FDA declined to adopt a formal definition of the term “natural” in food labeling. On November 12, 2015, the FDA announced a regulatory review of the use of the term “natural” on food product labels. 80 FR 69905-01. The FDA requested public comment on the use of the term “natural” in food labeling, “including when, if ever, the use of the term is false or misleading.” Id. at *68808. The deadline for comments was May 10, 2016, and the FDA received over 7,000 submissions, including ones from the dairy industry noting that “natural cheese” is a term of art.

Court Denies Stay Under Primary Jurisdiction Doctrine. On December 18, 2015, Kraft filed a motion to stay pending a decision by the FDA and/or the Ninth Circuit as to the definition of “natural” in food labeling. The court denied the motion without prejudice to renewal based on new developments. On October 27, 2016, Kraft renewed the motion to stay in light of anticipated rulemaking by the FDA. Again, the court denied the motion without prejudice to renewal based on new developments in the FDA rulemaking process.

Despite the trend toward stays, the court rejected Kraft’s argument that it should align with other district courts that have issued stays pending completion of the FDA’s rulemaking. The court distinguished those cases as involving the question of whether FDA regulations were violated. Here, “the question is whether the ‘natural cheese’ label is deceptive to the reasonable consumer” under the UCL, FAL, and CLRA, and the court reasoned that FDA standards are not determinative of that question.

The court also rejected Kraft’s argument that the FDA’s rulemaking, if any, will have a direct bearing on the case. The court noted that Kraft’s compliance with FDA regulations would not automatically shield Kraft from a claim under the UCL, FAL, or CLRA, and that the plaintiffs have already presented evidence that the term “natural cheese” is material to, and deceives, a reasonable consumer. Finally, the court noted that it is unclear whether and how the FDA will act on the term “natural.” The court believed it was more efficient to proceed given that the case is currently teed up for Kraft’s motion to decertify the class and challenge plaintiffs’ expert, neither of which would be affected by the FDA’s rulemaking.

Kraft Takeaway. Despite the trend toward stays pending the FDA’s “natural” rulemaking, this case highlights that courts have discretion to deny a stay, such as where a case has proceeded past class certification or the merits. This case was also uniquely positioned, as the plaintiffs challenged a distinct use of the term “natural” that modifies cheese, a term of art in the dairy industry, and that was based on the allegation that the product included artificial colors, which are separately regulated by the FDA. Based on these unique procedural and factual circumstances, it is far from clear whether other courts will deny stays on the same bases in other “natural” cases.