Laura Rude-Barbato, mother of three children, and Athena Hohenberg, mother of a 4-year-old, filed a class action false advertising lawsuit in a California federal court against Ferrero U.S.A., Inc., the maker of Nutella. Plaintiffs alleged that Ferrero falsely advertises Nutella as nutritional when in reality it is no healthier than a candy bar.

Plaintiffs Marnie Glover and Jayme Kaczmarek filed similar class action lawsuits – later consolidated – in federal court in New Jersey. Ferrero recently agreed to settle both lawsuits under separate agreements, subject to final court approval in July.

Plaintiffs in the California action alleged that for many years “Ferrero has been running television and print ads, primarily in Europe, suggesting Nutella is nutritious, an appropriate breakfast food, and that it promotes children’s healthy growth and development.” Plaintiffs also alleged that “Ferrero has invaded the United States with the same misleading advertising strategies, played out on the labels of Nutella, in television commercials and print ads, on the Web and elsewhere, designed to and effective in persuading American consumers that Nutella is an appropriate breakfast food, and a healthy alternative to things like jelly and syrup.”

According to plaintiffs, Ferrero’s allegedly deceptive advertising campaign is misleading “because Nutella, far from being nutritious and part of a ‘balanced breakfast,’ in fact contains about 70% saturated fat and highly processed sugar by weight. . .[is]. . .made with partially hydrogenated vegetable oil. . .and therefore contained toxic artificial trans fat. . .substances [that] contribute significantly to a number of serious diseases, and cause thousands of otherwise preventable deaths each year.” Plaintiffs in the New Jersey action alleged similar claims against the company.

The challenged commercials show a mother feeding Nutella to her child while claiming it is a healthy, balanced breakfast. Similarly, Nutella’s labeling portrayed the spread as a healthy breakfast by showing fresh fruit, whole wheat bread, and orange juice.

California plaintiffs filed their class action lawsuit asserting claims for false advertising, unfair competition, violation of California’s Consumer Legal Remedies Act, breach of express warranty, and breach of implied warranty of merchantability. Plaintiffs sought “an order compelling Ferrero to (1) cease marketing its products using the misleading tactics [alleged in the lawsuit], (2) conduct a corrective advertising campaign, (3) restore the amounts by which Ferrero was unjustly enriched, and (4) destroy all misleading and deceptive materials and products.” Plaintiffs also demanded that Ferrero admit that Nutella was not any healthier than a candy bar. The New Jersey plaintiffs alleged violations of New Jersey’s Consumer Fraud Act, as well as claims for breach of express and implied warranties.

On January 10, 2012, the parties in the New Jersey action filed a class action settlement agreement resolving their dispute. Similarly, on January 19, 2012, the parties in the California action also filed a class action settlement agreement with the federal court in California. Despite submitting to the terms of these settlements, which Ferrero says it did only to avoid costly litigation, the company denies any wrongdoing or liability, and continues to stand by its products and advertising campaigns. Ferrero agreed under the settlements to pay over $3 million to consumers and up to another $3.9 million in fees and costs. Ferrero also agreed to (1) include Nutrition Keys on the front panel of Nutella “indicating quantity/content of Calories, Saturated Fat, Sodium and Sugar in Nutella based on the serving size”; (2) modify the back panel of Nutella’s label “by removing the phrase ‘An example of a tasty yet balanced breakfast’ and replace it with ‘Turn a balanced breakfast into a tasty one’”; (3) replace and not air the television commercial at issue; and (4) modify Nutella’s Web site by removing certain information, and replacing the phrases “Nutella and Nutrition,” “About Nutella,” and “Breakfast Builder” with new language.

The federal court in California issued an order preliminarily approving the settlement on January 23, 2012, and scheduled a fairness hearing for July 9, 2012, for final approval of the settlement. On February 3, 2012, the court in New Jersey also issued an order preliminarily approving the settlement in that action, scheduling its final fairness hearing for July 9.

To read copies of the court documents in both actions, click here.

Why it matters: Food retailers must carefully and accurately label and advertise the nutritional value of their food products to avoid class action litigation. Retailers must have substantiation for their health claims and be sure not to oversell the nutritional value of their products. Otherwise, savvy class counsel with sympathetic clients trolling for an easy payday may bring costly lawsuits for allegedly deceptive advertisements or product labeling that could have easily been avoided.