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.