Duane Morris Consumer Fraud Class Action Review – 2024

The plaintiff in Falcone, et al. v. Nestle USA, Inc., 2023 U.S. Dist. LEXIS 121534 (S.D. Cal. July 13, 2023), filed a class action alleging a false advertising claim. The plaintiff alleged that the defendant, Nestle, advertised its cocoa as “sustainably” harvested, but such advertisement was false because despite Nestle ’ s initiative – coined its “Cocoa Plan” – to address the use of child labor on African cocoa farms, in reality child labor on cocoa farms was worsening. Id. at *2. Specifically, the plaintiff asserted that Nestle ’ s labels falsely led consumers to believe that the products were produced in accordance with environmentally and socially responsible standards, when in fact, the defendant actually incorporated cocoa from West African plantations that relied on child labor and child slave labor into its products, contributed to deforestation, and used other practices that harmed the environment. As such, the plaintiff alleged that Nestle falsely advertised its cocoa in violation of the California Labor Relations Act (CLRA) and the Unfair Competition Law (UCL), when it labeled it “sustainably” harvested and that the plaintiff reasonably relied on the “social and environmental benefits prominently featured on the packaging” when she purchased Nestle ’ s cocoa. Id. at *3. Nestle moved to dismiss the plaintiff ’ s putative class action complaint pursuant to Rule 12 for lack of standing. Nestle argued it simply did not advertise what the plaintiff contended Nestle ’ s “sustainably harvested” terminology advertised. Nestle argued it never claimed to have eradicated child labor concerns in cocoa harvesting or production and that a quick visit to Nestle ’ s website would have made this clear to the plaintiff. The court denied Nestle ’ s motion to dismiss, reasoning the complaint contained sufficient allegations to support the plaintiff ’ s claim that Nestle ’ s advertisement of “sustainable” cocoa was likely to mislead reasonable consumers. The court explained that whether a business practice is deceptive or misleading under the CLRA or UCL was governed by the reasonable consumer test, and a plaintiff must show that members of the public are likely to be deceived. Nestle sought inclusion of a part of its website, stating the plaintiff incorporated it by reference, but the “NESTLÉ® Cocoa Plan” did not prevent Nestle ’ s motion from being denied. Id. at *8. The Cocoa Plan was created in 2009 “to make cocoa farming more sustainable [and] improve the lives of farmers,” but it also stated that the cocoa was sourced through child labor, including “hazardous work.” Id. The court determined that the plaintiff ’ s complaint alone alleged specific claims regarding the child labor, child slavery, and hazardous child work, and cited third party sources in support of the contention that the incidence of child labor increased since 2009. The court opined that these allegations were deemed sufficient to support the plaintiff ’ s claim of misleading and deceptive advertising. For these reasons, the court ruled that the plaintiff plausibly alleged the defendant made deceptive statements, and thereby denied the motion to dismiss. This ruling poses interesting questions to class action litigators as to whether disputes over interpretation be raised early in the litigation, and whether it is more advantageous to raise them later in a case, after the benefit of additional discovery. Every class action is different, so timing is often a matter of strategy based on the facts and circumstances facing the defendant. In another deceptive marketing case, Gallagher, et al. v. Lactalis American Group, Inc., 2023 U.S. Dist. LEXIS 173308 (W.D.N.Y. Sept. 21, 2023), the plaintiff, a consumer, filed a class action alleging that the defendant ’ s “Feta Crumbles” marketed under the “President” brand name were deceptively marketed in violation of the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) and consumer fraud laws in multiple states. Id. at *1-2. The plaintiff also brought claims for breach of warranty, negligent misrepresentation, fraud, and unjust enrichment. The plaintiff alleged that she purchased President-brand Feta Crumbles from various stores, including BJ ’ s Wholesale Club, believing the cheese was made in Greece or another European country based on the product ’ s packaging, which included statements like “Europe ’ s Leading Cheese Expert,” a depiction of a gold olive branch wreath, and the word “feta” in an ancient Greek font. Id. a t*2. However, the plaintiff stated that the product ’ s back label indicated that the product was made in the United States. The court granted the defendant ’ s motion to dismiss. The court found that the plaintiff failed to show that a reasonable consumer would be deceived by the packaging and therefore she failed to state a viable claim under the FDUTPA. The court further opined that the plaintiff lacked standing to bring consumer fraud claims from other states because she did not purchase the product in those states. The court also dismissed the warranty, negligent misrepresentation, and fraud claims due to a lack of deceptive intent. Furthermore, the court dismissed the plaintiff ’ s unjust enrichment claim for lack of sufficient factual support. For these reasons, the court granted the defendant ’ s motion to

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