Cheslow v. Ghirardelli Chocolate Company

Background

Linda Cheslow and Steven Prescott brought three California-law claims against Ghirardelli Chocolate Company: violation of California’s Unfair Competition Law, false and misleading advertising, and violation of the California Consumer Legal Remedies Act. They sought to certify a class of people who purchased Ghirardelli’s “Premium Baking Chips Classic White Chips” in the United States or, alternatively, California.

Cheslow alleged that she bought the product in December 2018 and relied on its label and advertising, believing it was white chocolate rather than “fake” white chocolate. Before this case, an earlier class action involving Ghirardelli’s Classic White Chips had settled in 2014. Cheslow was a member of that settlement class, submitted a claim, and received $16.50 for purchases made between 2008 and 2010.

Motion and Arguments

Ghirardelli moved for partial summary judgment. Summary judgment is a ruling entered when the evidence shows no genuine dispute about a fact important to the outcome and the moving party is entitled to judgment as a matter of law. The court had initially received a motion to dismiss but converted part of it into a summary-judgment motion after Ghirardelli raised a factual issue.

The issue was whether Cheslow’s current false-advertising claims were barred either by preclusion doctrines or by the release in the earlier settlement. Ghirardelli argued that the settlement released claims concerning marketing suggesting that the White Chips were or contained white chocolate or chocolate, as well as claims that the product names were confusing or misleading.

Cheslow argued that the products were labeled differently, that the earlier settlement did not include an admission of liability or a decision on the merits, and that the settlement could not cover conduct that had not yet occurred. The parties agreed that Cheslow was a settlement-class member and that the earlier class period ended in 2014. They disputed whether the products in the two cases were the same, but the court found that dispute immaterial to the motion.

Court’s Analysis

The court first addressed claim preclusion, which generally prevents repeated litigation of the same claim after a qualifying final judgment involving the same parties or their legal equivalents. The court found that the earlier settlement and current case involved identical parties and that the earlier settlement was a final judgment on the merits. But it found no identity of claims because Cheslow’s current claim arose from her December 2018 purchase and did not exist when the earlier action began in 2012 or when it settled in 2014. Claim preclusion therefore did not bar the current claim.

The court next addressed issue preclusion, which prevents relitigation of a factual or legal issue that was actually litigated and resolved in an earlier valid determination. Although the issues identified by Ghirardelli were relevant to both cases, the earlier settlement contained a “No Admission of Liability” clause. That clause stated that the settlement and releases were not an admission or concession of liability, the validity of any claim or defense, or any point of fact or law. The court concluded that the parties did not intend to be bound by the settlement’s terms in later litigation, so issue preclusion did not apply.

The court then interpreted the settlement’s release under California contract law. The release covered claims that had been or could have been asserted in the earlier litigation and claims concerning whether Ghirardelli’s White Chips names were confusing or misleading or whether the product was marketed as containing white chocolate, chocolate, or cocoa butter. The court found the language unambiguous. Nevertheless, Cheslow could not have asserted a claim based on her 2018 purchase in the earlier litigation, and the current claim did not arise from an identical factual predicate. The court therefore held that the settlement did not release Cheslow’s present claims.

Disposition

The court denied Ghirardelli’s motion for partial summary judgment. The opinion did not decide the ultimate merits of Cheslow’s false-advertising claims.