Kettle Brand Chips Consumer Fraud Complaint Narrowed

A federal court in California has granted in part the motion to dismiss filed
by Diamond Foods, Inc. in a putative class action alleging that the company
misleads consumers by claiming that its Reduced Fat Sea Salt Chips are “40%
reduced fat potato chips” and its Backyard Barbecue Chips are “All Natural,” as
well as making false and deceptive statements in the company’s “promotional
materials” and on its “website.” Hall v. Diamond Foods, Inc., No. 14-2148 (U.S.
Dist. Ct., N.D. Cal., order entered July 31, 2014). An amended complaint, if any,
must be filed by August 15, 2014, and the case management conference will
be held on October 31.

The court dismissed the reduced fat claims finding them insufficiently
pleaded because it was unclear whether the plaintiff read only the statement
on the front of the bag, in which case he “would lack standing to argue the
statements on the back and bottom of the bag are false and deceptive,” or
whether he read each label statement, in which case “it is unclear how plaintiff
would not have understood the 40% comparison on the front and back was
with reference to regular potato chips, given the statement on the bottom
of the bag to that effect.” The plaintiff was given leave to amend to identify
the statement or statements on which he relied to purchase the product. The
court also agreed that the plaintiff had not adequately pleaded claims based
on promotional materials and website statements because he failed to allege
that he read any such statement before purchasing the products at issue. The
plaintiff was given leave to amend his complaint to cure the pleading defect.

As to the “All Natural” claims, the court allowed them to proceed, ruling that
the defendant’s argument that reasonable consumers would not be misled
by these labeling representations was premature. The court also rejected the
defendant’s argument that no reasonable consumer could be misled because
all of the ingredients, including citric acid and paprika extract, were identified
in the ingredient list. Citing the Ninth Circuit, the court noted that “reasonable
consumers expect that the ingredient list contains more detailed information
about the product that confirms other representations on the packaging”
and cannot be used as shield for liability for the alleged deception. The court
further allowed the seventh cause of action, titled “Restitution Based on
Quasi-Contract/Unjust Enrichment,” to proceed, finding that, while unjust
enrichment itself is not a cause of action, restitution may proceed under a
quasi-contract theory.