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March 30, 2016 - False Advertising, FDA, Food Misbranding

Ninth Circuit Revives Chobani Yogurt Action, But Puts Claims on Ice and Leaves Questions Unanswered

There has been much recent discussion of the primary jurisdiction doctrine, as well as stay motions based on the doctrine, related to FDA’s review of its evaporated cane juice (ECJ) draft guidance. Now, in its recent memorandum disposition in Kane v. Chobani, LLC, No. 14-15670 (“Order”), the Ninth Circuit has entered the “primary jurisdiction” debate, coming down on the side of defendants seeking stays. But, given the panel’s limited analysis, the full import of Kane is unclear.

Judge Koh Rejects Plaintiffs’ Alleged “Reliance” Below. The plaintiffs in Kane argued that that Chobani’s yogurt labelling was false and misleading because the yogurts contain ECJ and include “all natural” claims. After giving plaintiffs three chances to meet pleading requirements to show standing, Northern District of California Judge Lucy Koh ultimately held that plaintiffs failed to plead reliance necessary for standing with plausibility or particularity.

Specifically, Judge Koh rejected plaintiffs “illegal product theory”—e.g. plaintiffs’ claim that they need not prove reliance for claims under the UCL’s “unlawful” prong. Like all courts that have confronted similar arguments, Judge Koh held that because plaintiffs’ entire complaint sounded in fraud, they therefore must allege reliance for all of their claims, and do so with particularity. Kane v. Chobani, Inc., 973 F. Supp. 2d 1120, 1131 (N.D. Cal. 2014).

Judge Koh then found that plaintiffs failed to adequately plead reliance for either their ECJ or “all natural” claims. As for ECJ, Judge Koh found it implausible that plaintiffs did not know that ECJ was not a sweetener, as allegations in their complaint undermined their claims.  Id. at 1134. As for “all natural,” the court held that plaintiffs failed to provide sufficient allegations describing why challenged ingredients were not natural, as required to demonstrate they relied on the term and were deceived.  Id. at 1137. Because plaintiffs had tried—and failed—to meet these pleading requirements three times, Judge Koh concluded that amendment would be futile.  She accordingly dismissed the case with prejudice.  Id. at 1139.

The Ninth Circuit Pivots to Primary Jurisdiction. The Ninth Circuit did not address the standing or reliance requirements in Kane.  Instead, its unpublished memorandum opinion focused solely on primary jurisdiction. Citing to its recent decision in Astiana v. Hain, the panel held that:

The delineation of the scope and permissible usage of the terms ‘natural’ and ‘evaporated cane juice’ in connection with food products ‘implicates technical and policy questions that should be addressed in the first instance by the agency with regulatory authority over the relevant industry rather than by the judicial branch.’

Order at 2 (citations omitted). The panel noted that FDA is currently addressing both issues:  FDA issued a notice requesting comments regarding the term “natural” in November 2015, and confirmed in a letter to Northern District Court of California Judge Chen that it expected to finalize its ECJ guidance by the end of 2016. Id. at 3. Given FDA’s ongoing proceedings regarding these issues, the Ninth Circuit held that the primary jurisdiction applied. The panel vacated and remanded, instructing the district court to stay the action pending resolution of the FDA’s “natural” and “evaporated cane juice” proceedings.

Unanswered Questions. The Ninth Circuit’s affirmation of primary jurisdiction is helpful. But it leaves many questions unanswered.  Is the “illegal product theory” a viable argument? Were plaintiffs’ bare bones allegations sufficient to plead reliance? Kane does not provide the definitive answers on these arguments. But more Ninth Circuit misbranding arguments are up ahead. Stay tuned.