Ghirardelli Chocolate Co. has agreed to pay approximately $5.25 million to resolve a putative class action that accused the company of improperly advertising certain products as containing “white chocolate” when they failed to contain cocoa butter, which is required for “white chocolate” or “white chocolate flavor” under FDA regulations. A motion for preliminary approval of the proposed class settlement was filed on August 20th, with the settlement also providing that Ghirardelli make certain changes to its labeling.
Notably, the front labels for all of the targeted products, listed below, include the company name, Ghirardelli Chocolate, as shown in the above image:
a. Ghirardelli® Chocolate – Premium Baking Chips- Classic White,
b. Ghirardelli® Chocolate – White Chocolate Flavored Confectionary Coating Wafers,
c. Ghirardelli® Chocolate – Sweet Ground White Chocolate Flavor,
d. Ghirardelli® Chocolate – Premium Hot Beverage- White Mocha, and
e. Ghirardelli® Chocolate – Frappe Classico – Classic White
However, none of these products are specifically identified as “white chocolate,” in contrast to many other Ghirardelli products that include real coca butter. Plaintiffs nevertheless argued that, for a variety of reasons, the labels were inconsistent with FDA regulations and that labels are misleading because consumers would reasonably believe that the products include “white chocolate.”
For example, the packaging of the [Classic White Baking Chips] prominently uses the term”chocolate” in the company name “Ghirardelli® Chocolate.” It refers to the product as “Classic White” to deceptively mislead consumers into believing that it is classic white chocolate. It states that the product is “Premium” leading consumers to incorrectly believe that, unlike its competitors, the product is a premium white chocolate chip product. It then goes on to deceptively state [on the reverse]: “The luxuriously deep flavor and smooth texture of Ghirardelli Premium Baking Chocolate delivers the ultimate chocolate indulgence.” But because there is no chocolate or white chocolate in Defendants’ chips, the product cannot deliver a “deep chocolate flavor or texture” or the “ultimate chocolate indulgence.” The label further says [on the reverse] that the product contains the “Finest grind for smoothest texture and easiest melting” but in fact, unlike real white chocolate, the product is not “ground” from cocoa beans.
Per Law360, Ghirardelli stands behind the accuracy of its labeling and marketing but “opted to settle the suit to avoid the ‘expense and distractions’ of litigating what it believes to be ‘nuisance allegations.'”
This case highlights the dangers of including regulated terms in a company name/trademark and the need to scrutinize marketing language across product lines. In this regard, in evaluating the risk of a lawsuit, the question is not whether you believe that reasonable consumers are misled by a label, but whether a colorable argument exists that consumers might be misled (thus creating the risk of a colorable lawsuit).
Numerous labeling class action suits were spawned by the FDA’s 2009 draft guidance advising that, in the FDA’s view, “the term ‘evaporated cane juice’ is not the common or usual name of any type of sweetener, including dried cane syrup.” Plaintiffs generally cite this draft guidance, and FDA warning letters citing the guidance, as indicating the FDA’s view that “evaporated cane juice” (ECJ) is false and misleading and violates regulations that ensure labeling with common ingredient names. But on March 4, 2014, the FDA reopened the comment period on this guidance and announced its intent, following review of the comments, to “revise the draft guidance” and “if appropriate, … issue it in final form.”
Not surprisingly, this announcement prompted defendants in these class action suits to assert the primary jurisdiction doctrine as a basis for dismissing or staying the lawsuits. This doctrine was recently asserted in the context of natural claims with varying success until the FDA dispelled any notion that it might define “natural” in the near future or in the context.
This time, the courts have been very receptive to the argument. To date, the following putative class actions over evaporated cane juice (“ECJ”) have been stayed or dismissing without prejudice in light of the FDA’s pronouncement:
- Gitson v. Clover Stornetta Farms, No. 13-cv-01517, 2014 WL 2638203 (N.D. Cal. Jun. 9, 2014) (yogurt);
- Swearingen v. Late July Snacks LLC, No. 13-cv-4324, 2014 WL 2215878 (N.D. Cal. May 29, 2014) (crackers and chips);
- Swearingen v. Yucatan Foods, L.P., No. 13-cv-3544, 2014 WL 2115790 (N.D. Cal. May 20, 2014) (guacamole);
- Avila v. Redwood Hill Farm & Creamery, Inc., No. 5:13-cv-00335, 2014 WL 2090045 (N.D. Cal. May 19, 2014) (yogurt);
- Swearingen v. Attune Foods, Inc., No. C 13–4541 SBA, 2014 Wl 2094016 (N.D. Cal. May 19, 2014) (cereal and probiotic bars);
- Figy v. Lifeway Foods, Inc., No. 13-cv-04828, 2014 WL 1779251 (N.D. Cal. May 5, 2014) (kefir);
- Figy v. Amy’s Kitchen, Inc., No. 13-cv-03816, 2014 WL 1379915 (N.D. Cal. Apr. 9, 2014) (variety of food products).
And just recently, over the past 7 days, two additional cases have followed the exact same reasoning on this issue:
- Gitson v. Trader Joe’s Company, No. 13-cv-01333 (N.D. Cal. Aug. 8, 2014): Staying case and observing that, “b]ecause the FDA appears to be actively considering the lawfulness of the use of the term ‘evaporated cane juice’ on food labels, it makes sense to stay the plaintiffs’ evaporated cane juice claims to see if the agency does, in fact, issue final guidance on the issue. Several other courts in this district have done the same.”
- Saubers et al. v. Kashi Co., No. 3:13-cv-00899 (S.D. Cal. Aug. 11, 2014): Dismissing case without prejudice and stating that “[a]llowing the FDA to resolve this matter in the first instance would permit the court to benefit from the agency’s technical expertise and would also provide for uniformity in administration of the agency’s food labeling requirements.”
The agreement by the courts on this issue is not surprising given the strong reliance placed by plaintiffs on the FDA draft guidance and associated warning letters regarding ECJ. Such reliance is necessary because ECJ is simply a listed ingredient on the nutrition facts label and that label also includes the total sugars in the product. These claims thus differ from most other labeling class actions because they generally do not encompass allegedly misleading statements on the front of the product that tend to make irrelevant the nutrition facts label on the back of the product. See Williams v. Gerber Products Co., 552 F.3d 934, 939 (9th Cir. 2008) (“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”).