The Ninth Circuit Court of Appeals recently reversed in part and
affirmed in part a Northern District of California ruling
here) concerning the "All Natural Fruit" labeling on
Dole's packaged fruit products. Brazil v. Dole Packaged Foods,
LLC, No. 14-17480, 2016 WL 5539863 (9th Cir. Sept. 30, 2016). The
appeals court reversed the lower court's order granting summary
judgment in favor of the defendant on plaintiff's false
advertising and unfair competition claims, finding that a trier of
fact could conclude that the label is misleading to a reasonable
consumer. Notably, the Ninth Circuit also ruled that the district
court did not err in decertifying the class where
plaintiff failed to show how damages could be calculated with proof
common to the class.
With respect to decertification, the Ninth Circuit found that
the district court properly limited damages to the difference
between the prices customers paid and the value of the fruit they
brought – otherwise known as the "price premium"
attributable to the "All Natural Fruit" labels. The court
held that the district court did not abuse its discretion in
decertifying the class because the plaintiff failed to explain how
this premium could be calculated with proof common to the class.
The court also rejected the plaintiff's claim that he would be
entitled to damages under a theory of "nonrestitutionary
disgorgement" if a price premium were not available. Although
a disgorgement award could theoretically exceed an award of
restitution, the court found that this was not the case here
because the portion of Dole's profits that were wrongfully
obtained equaled the price premium paid by misled purchasers. As a
result, restitution and disgorgement were functionally the same
remedy, the plaintiff failed to show that either could be
calculated with common proof across the class, and the class was
properly decertified. The panel did allow the plaintiff to pursue
an individual claim for restitution and class-wide injunctive
relief on remand.
Although the Ninth Circuit affirmed the district court's
decision on class certification, it reversed the district
court's order granting summary judgment for Dole on
plaintiff's deceptive advertising claims. The plaintiff argued
that Dole's labels are deceptive because the products contain
synthetic citric and ascorbic acid. The FDA has not directly
addressed the meaning of "natural" since 1993, when the
FDA informally defined it to mean "that nothing artificial or
synthetic... has been included in, or has been added to, a food
that would not normally be expected to be in the food."
However, the plaintiff cited to recent warning letters the FDA sent
to food sellers who described their products as "all
natural" even though the products included, among other
substances, synthetic citric acid. In the warning letters, the FDA
stated that foods which naturally contain citric acid, such as
tomatoes, could not be labeled "all natural" if synthetic
citric acid had been added. These warnings were made without
reference to whether the synthetic substances would "not
normally be expected to be in the food."
Multiple "all natural" labeling suits have been stayed
pending the Ninth Circuit's decision in this case. While the
panel's decision in this case is unpublished, it will be
interesting to see whether other courts take the same approach in
relying on FDA warning letters to determine what goods can be
labeled "all natural." The court's decision also
highlights the importance of providing a damages model that can
calculate a "price premium" across an entire class of
plaintiffs at the class certification stage.
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