In Re Theos Dark Chocolate Litigation

Background

Pamela Chesavage, Rockime Davis, and MyHang Le sued Theo Chocolate, Inc. over at least 15 dark-chocolate products. They alleged that the products contained, or were at risk of containing, cadmium, lead, and arsenic at levels exceeding California’s then-governing maximum allowable daily levels. According to the complaint, Theo’s labels—including the word “Pure,” statements about “quality cacao beans,” and statements that the products were “organic chocolate you can feel good about”—created the misleading impression that the products did not contain heavy metals.

The plaintiffs asserted nine causes of action under California, Washington, and New Jersey consumer-protection laws, as well as claims for negligent misrepresentation, unjust enrichment, breach of the implied warranty of merchantability, and breach of express warranties. Theo moved to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6), which address subject-matter jurisdiction and whether a complaint adequately states a claim. Theo also moved to stay discovery while the dismissal motion was pending.

Judicial Notice

The court granted in part and denied in part Theo’s request for judicial notice. It considered a Consumer Reports article incorporated into the complaint, an FDA webpage for the limited fact that the FDA represented it was evaluating ways to limit contaminants in children’s foods, and filings and a government letter showing the existence and outcomes of related state-court litigation. The court declined to accept the disputed factual assertions and interpretations in the other exhibits as true.

Standing and Other Threshold Arguments

The court held that the plaintiffs adequately alleged an injury in fact because they claimed they paid for products they would not have bought if the alleged heavy-metal information had been disclosed. The court also held that they adequately alleged a future injury supporting injunctive relief because they said they would buy Theo’s chocolate in the future if its labeling were truthful. The court rejected Theo’s argument that the plaintiffs lacked standing to assert claims on behalf of a nationwide class, noting that the plaintiffs said their nationwide consumer-fraud claims relied on Washington law and that their remaining common-law claims did not invoke a particular state’s law.

The court declined to dismiss or stay the case under the primary-jurisdiction doctrine. It concluded that the case principally concerned whether product labels were misleading, rather than a technical food-safety issue requiring the FDA’s expertise, and found no reason to believe that a binding FDA investigation or rulemaking concerning heavy metals in dark chocolate would soon resolve the dispute.

The court also rejected Theo’s argument that a 2018 consent judgment from related Proposition 65 litigation barred certain California omission-based claims. The court concluded that the plaintiffs’ claims concerned alleged misrepresentations to consumers and were independent of Proposition 65, so the consent judgment had no preclusive effect in this case.

Claims

The court denied dismissal of the California statutory consumer-protection claims to the extent they relied on the product-label statements “Pure” and “quality cacao beans.” At the pleading stage, the court held that a reasonable consumer could conceivably understand those statements to suggest the absence of heavy metals, although it expressed skepticism about that theory. The court treated “Farm to bar to you” and “chocolate you can feel good about” as nonactionable puffery—generalized statements that reasonable consumers would not rely on as factual promises. It did not consider affirmative-misrepresentation claims based on Theo’s website because the plaintiffs did not plead reliance on those statements.

The court granted dismissal of the statutory consumer-protection claims based on omissions. It held that the plaintiffs had not adequately alleged that Theo had a duty to disclose the heavy-metal content. The plaintiffs had alleged health risks from heavy metals generally, but had not alleged that the amounts in Theo’s products caused harm or created an unreasonable safety hazard. They also had not plausibly alleged that trace amounts of heavy metals made the chocolate incapable of functioning as food or providing nutritional value.

The court denied dismissal of the negligent-misrepresentation claim. It declined to consider Theo’s economic-loss argument because Theo raised it for the first time in its reply brief and concluded that Theo had not otherwise shown that the claim was inadequately pleaded.

The court denied dismissal of the unjust-enrichment claim, construing it under California law as a possible quasi-contract claim seeking restitution. The court held that the plaintiffs sufficiently alleged that Theo induced purchases through fraudulent misrepresentations and received financial benefits as a result.

The court granted dismissal of the breach-of-implied-warranty claim. The plaintiffs had not plausibly alleged that chocolate containing trace amounts of heavy metals was unfit for its ordinary purpose, failed to meet the standard performance of similar products, or exceeded the limits imposed by the consent judgment.

The court denied dismissal of the breach-of-express-warranty claim. It held that a reasonable consumer could understand “Pure” to suggest the absence of heavy metals, and at this stage the court had to accept the plaintiffs’ allegations that the products contained harmful and dangerous levels of heavy metals.

The court declined to dismiss the plaintiffs’ unlawful-misbranding claim under California law. It found factual disputes about whether the heavy metals were present at insignificant levels and rejected Theo’s argument that the claim was expressly preempted by federal labeling law. The court reasoned that the claim relied on California’s adoption of federal labeling requirements rather than seeking to impose additional or different requirements.

The court denied dismissal of the claims for equitable relief because the plaintiffs adequately alleged that legal remedies were insufficient, including by alleging that they would not purchase Theo’s products until they could rely on the products’ representations.

Disposition

The court granted in part and denied in part Theo’s motion to dismiss. Specifically, it dismissed the plaintiffs’ statutory consumer-protection claims arising under an omissions theory and dismissed the breach-of-implied-warranty claims. The dismissal was with leave to amend, and any amended complaint had to be filed within 28 days of the order.

The court terminated Theo’s motion to stay discovery as moot because the court had resolved the motion to dismiss before ruling on the requested temporary stay. The court also set a case-management conference for November 12, 2024, and directed the parties to file a joint case-management statement by November 5, 2024.