Federal Labeling Law Does Not Preempt Claims Against JOOSE® Maker

A federal court in California has refused to dismiss most of the putative class claims filed by a consumer against a company that made an alcoholic beverage containing high levels of caffeine, finding that a federal alcohol labeling law did not preempt state-law claims based on labeling or advertising and that the allegations of economic injury are sufficient to establish standing under California’s Unfair Competition Law (UCL). Cuevas v. United Brands Co., Inc., No. 11-991 (S.D. Cal., order entered March 8, 2012). The defendant manufactured and sold JOOSE®, a flavored beverage with about 125 mg caffeine and 9.9 to 12 percent alcohol, from 2007 until it voluntarily removed the product from the market in December 2010 after receiving a warning letter from the Food and Drug Administration (FDA).

The plaintiff allegedly purchased the product on two occasions in April and August 2010 and subsequently filed suit alleging that the defendant violated various state consumer fraud laws, breached express and implied warranties, and violated the Magnuson-Moss Warranty Act. She claimed that she was misled into purchasing the products because the company failed to disclose either the amount of caffeine in its products or the purported risks associated with caffeine as used in the products. Among other matters, the company argued in its motion to dismiss that a federal law requiring certain warnings on the labels of alcoholic beverages preempted the plaintiff’s claims that failure to warn about the interaction of caffeine and alcohol was deceptive and misleading.

The court refused to interpret the law’s express preemption provision broadly,
finding instead that while Congress, in enacting 27 U.S.C. § 213, intended
“to prevent a patchwork of state requirements with respect to the warnings
about the health hazards of consuming alcohol,” it did not intend “to ban
warnings regarding other non-alcoholic ingredients in an alcoholic beverage
that may have adverse health effects in and of themselves or when combined
with alcohol.” The court also determined that an interaction warning “would
not interfere with congressional goals” relating to uniform package warnings
“regarding the health risks associated with consuming or abusing alcohol,”
thus turning aside the defendant’s implied preemption argument.

The court further ruled that (i) the federal Alcohol Beverage Labeling Act
applies to product labels and cartons only, so the plaintiff’s claims relating to
marketing not involving JOOSE® containers or packaging are not preempted;
(ii) because the plaintiff notified the company about the complaint 30 days
before filing her first amended complaint, the notification requirements of
California’s Consumers Legal Remedies Act were satisfied; (iii) the plaintiff
had sufficiently pleaded an economic injury under California’s Proposition 64,
which restricts UCL standing, citing Kwikset Corp. v. Super. Ct., 51 Cal. 4th 310
(2011), in which the California Supreme Court indicated that economic injury
from unfair competition may be shown in “innumerable ways”; and (iv) the
plaintiff failed to allege that the defendant had made express representations
or warranties about the safety of consuming caffeine with alcohol and thus
could not state a claim for breach of express warranty.

As to the plaintiff’s claim for breach of an implied warranty, the court noted
that the inherently dangerous product exception to liability applies to “pure
and unadulterated products,” such as sugar, castor oil, alcohol, and butter, and
that in this case, the plaintiff claims that the defendant’s “alcoholic beverage
was adulterated with caffeine. Plaintiff alleges that the addition of caffeine
made the alcoholic beverage unreasonably dangerous.” Accordingly, the court
ruled that the exception does not apply to her implied warranty claim and
allowed it to proceed.

The court denied the defendant’s request to strike certain portions of the first amended complaint as irrelevant or prejudicial; these included FDA’s warning letter, communications between the defendant and the agency, articles about caffeinated alcoholic beverages, and congressional remarks about the products. The court found that the allegations “generally relate to safety concerns regarding caffeine in alcoholic beverages and may relate to Defendant’s knowledge of such concerns.”