A plaintiff's suit against 7-Eleven over the labeling of potato chips will move forward after a panel of the Ninth Circuit Court of Appeals reversed dismissal of the claims.

A fan of the chain's private label potato chips, Scott Bishop, sued over the differences found on the front and the back of the chip bag. On the front of the package, the chips were touted as having "0g trans fat" and "no cholesterol," while on the back, the nutrition information for fat content revealed a different story.

A federal court judge tossed the suit, determining that Bishop's complaint failed to allege sufficient facts to establish statutory standing under California's unfair competition law, false advertising law, and Consumer Legal Remedies Act. But a three-judge panel of the Ninth Circuit reversed in an unpublished memorandum.

"At this preliminary stage of the action, Bishop sufficiently alleged actual reliance, which he was required to do under each of his theories because his claims sound in fraud," the court wrote. "Bishop adequately alleged that he relied on 7-Eleven's potato chips' front of package '0g trans fat' and 'no cholesterol' representations, and that he would not have purchased the chips had 7-Eleven included on the front of the package the 'See nutrition information for fat content' disclosure required by the U.S. Food and Drug Administration."

The reasonable consumer standard, unlike the individual reliance requirement, is not relevant to the standing inquiry, the panel noted.

"California's consumer protection statutes render statements actionable which, although not technically false, have a tendency to mislead consumers because the statements fail to disclose or direct the consumer's attention to other relevant information," the court said, reversing dismissal of Bishop's complaint.

To read the memorandum in Bishop v. 7-Eleven, Inc., click here.

Why it matters: Although unpublished, the Ninth Circuit memorandum emphasized two consumer-friendly points for advertisers to keep in mind: California law permits consumers to sue even if a statement is not "technically false," but is truly misleading, and the reasonable consumer standard is not a standing requirement, as long as the consumer can establish individual reliance.