Federal Court Dismisses Parts of Consumer Fraud Action Against Frito-Lay & PepsiCo

A federal court in California has dismissed in part the first amended complaint in a putative class action against Frito-Lay and PepsiCo, alleging that the companies falsely advertised and labeled their products as “All Natural,” “0 Grams Trans Fat,” “No MSG,” “low sodium,” “healthy,” and with other unspecified health claims. Wilson v. Frito-Lay N. Am., Inc., No. 12-1586 (N.D. Cal., order entered April 1, 2013). Dismissed with prejudice were claims that the companies breached warranties under the Magnuson-Moss Warranty Act and the Song Beverly Consumer Warranty Act. Among the claims that the plaintiffs will be allowed to amend are the allegations against PepsiCo, dismissed due to insufficient pleading; allegations involving products not specifically named or described in the complaint; and a claim for restitution based on unjust enrichment, which should have been pleaded in the alternative.

To the extent that the plaintiffs based their unfair, false and deceptive
advertising claims on website statements, the court was not convinced
that the website constitutes labeling under the Food, Drug, and Cosmetic
Act, but allowed the plaintiffs to amend their complaint to show how the
website language “explains or supplements the individual Named Products
such that the website could generally be found to ‘accompany’ the Named
Products.” The court refused to find that the “No MSG” claims were preempted.
According to the court, a Food and Drug Administration statement—posted
on the agency’s website after the motion to dismiss was filed— interpreting
ambiguous MSG labeling regulations was entitled to deference and was
binding even though it had not been promulgated with notice-and-comment
rulemaking.

The court also refused to dismiss the “0 Grams Trans Fat” claims, distinguishing cases that found them preempted, because the plaintiffs here were not attempting to impose stricter requirements under state law than are imposed under federal law. Regarding the “Made with ALL NATURAL” ingredients labeling on the product packages, the court found that they could mislead consumers, rejecting the defendants’ assertion that “the label only states that the product includes some all-natural ingredients, in this case potatoes and natural oil” and that “a reasonable consumer, as a matter of law, would read the statement in that context and sate any further curiosity by reading the nutrition box.” The court cited Williams v. Gerber Products Co., 552 F.3d 934 (9th Cir. 2008), for its holding that reasonable consumers should not be “expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box.”