Puri v. Costco Wholesale Corporation

Background

Ankush Puri brought a proposed false-advertising class action against Costco Wholesale Corporation concerning Kirkland Signature “Chocolate Almond Dipped Vanilla Ice Cream Bars.” Puri alleged that the product’s name, pictures, and ingredient labeling misled consumers into believing that its chocolate coating was chiefly made from cacao-bean ingredients. He alleged instead that the coating contained more vegetable oils than cacao-derived ingredients. He also asserted theories based on the product’s taste or texture and on alleged health and nutritional differences between real chocolate and vegetable oils, although he later disclaimed a theory based on flavor.

Puri asserted claims under California’s Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act. Costco moved to dismiss under Federal Rule of Civil Procedure 12(b)(6), which allows dismissal for failure to state a legally sufficient claim, and Rule 9(b), which requires fraud allegations to describe the alleged misconduct with particularity.

Court’s Analysis

The court first addressed federal preemption. The federal Food, Drug, and Cosmetic Act, as amended by the Nutrition Labeling and Education Act, preempts state food-labeling requirements that are not identical to federal requirements. The court concluded that, to the extent Puri’s claims sought to require Costco to label the product “milk chocolate and vegetable oil coating” or “milk chocolate and vegetable oil almond dipped ice cream bars,” those claims were preempted because they sought requirements different from or additional to federal requirements.

The court did not decide whether Costco actually complied with federal regulations or policy guidance, and it did not reach Costco’s argument concerning the use of “chocolate” as a flavor designator. The court also noted that Puri had disclaimed a theory based on flavor and was pursuing a theory concerning chocolate as a nutritional ingredient.

The court separately held that Puri failed to state a deceptive-labeling claim under the reasonable-consumer standard. It found that the cited federal regulation defining chocolate as chiefly made from cacao beans did not exist, that Puri’s allegations were internally contradictory, and that his method for estimating the relative weights of the ingredients was speculative. The court noted that Puri’s own allegations identified 15 grams of vegetable oils and 12 grams of cacao-bean ingredients, which did not support his claim that the product was mostly vegetable oils with only a minimal amount of chocolate.

The court further reasoned that a reasonable consumer would not necessarily assume that the chocolate pictured on an ice cream bar’s packaging was the coating’s predominant ingredient, and that the ingredient list provided more detailed information. It also found implausible Puri’s theories that consumers would purchase chocolate-covered ice cream bars for health, nutritional, or satiety benefits, particularly because the packaging made no such claims.

Finally, Costco briefly argued that Puri’s claims sounded in fraud and failed to satisfy Rule 9(b). Puri did not address that argument in his opposition, and the court understood him to have conceded the issue. The court therefore also dismissed all claims for failure to comply with Rule 9(b).

Disposition

The court granted Costco’s motion to dismiss the amended complaint. It dismissed Puri’s claims under the California Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act based on the reasonable-consumer standard and also dismissed all claims for failure to comply with Rule 9(b). The court did not reach whether Puri had standing to seek injunctive relief or whether he timely provided notice of his claim for damages under the Consumers Legal Remedies Act.

Because the court could not say that amendment would be futile, it granted Puri limited leave to amend. The court directed him to file a second amended complaint by January 3, 2022, alleging a statute or regulation requiring chocolate to be made chiefly from cacao beans.