A multidistrict litigation (MDL) court in New York has granted in part the motion to dismiss filed in a putative class action alleging that Frito-Lay North America and PepsiCo., its parent, mislead consumers by labeling various Tostitos®, SunChips® and Fritos Bean Dip® products as “all natural” when they contain genetically modified organisms (GMOs). In re Frito-Lay N. Am., Inc. All Natural Litig., MDL No. 2413 (U.S. Dist. Ct., E.D.N.Y., order entered August 29, 2013). The court dismissed PepsiCo, Inc. from the litigation without prejudice, finding that the complaint failed to allege sufficient facts to support its liability.
Among other matters, the court refused to dismiss the suit on the basis of (i) the primary jurisdiction doctrine (noting that the issues do not require specialized knowledge to resolve and that “the FDA [Food and Drug Administration] is unlikely to respond in a timely manner to any referral from this Court”), (ii) preemption (finding that FDA’s non-binding guidance on the issue lacks preemptive effect), or (iii) standing. According to the court, whether the plaintiffs could pursue their claims as to products they did not purchase is a question of class standing in the Second Circuit and not of Article III standing. The court also declined to rule, on the basis of numerous agency-related documents of which it agreed to take judicial notice, including material from “three federal agencies, states, and industry and consumer groups, . . . that ‘natural’ does not mean GMO-free.” Whether reasonable consumers understand the “All Natural” label in this light is, in the court’s view, a question of fact that cannot be determined on a motion to dismiss.
The named putative class representatives in these consolidated actions are residents of New York, California and Florida, seeking to represent a nationwide class of consumers and various statewide subclasses; much of the court’s opinion considers whether specific claims can be maintained under certain state laws as to non-residents. As to each state’s “safe harbor” provisions, the court refused to find that Frito-Lay had earned their protection, because neither the states nor the federal government has clearly provided for the use of “all natural” labeling for food products. The only claims dismissed with prejudice were the Magnuson-Moss Warranty Act claim and certain New York state-law claims to the extent they were alleged on behalf of non-New York plaintiffs.
For the most part, the court found that the plaintiffs had sufficiently pleaded their claims, except for an allegation that the defendants knew their products were not “all natural” because they contained GMOs. According to the court, simply pleading that a wrongdoer seeks to increase sales and revenue by labeling a product “all natural” “does not support a strong inference of fraudulent intent,” because such motives “pertain to virtually any company that manufactures and distributes goods.” The court also found that to the extent the plaintiffs’ claims “are predicated on advertising and marketing materials beyond the products’ labeling,” they are insufficiently pleaded. The plaintiffs have 30 days to request that the court allow them to amend the complaint.