Effinger v. Ancient Organics LLC

Background

Kelly Effinger and Keefe Stevernu brought a proposed consumer class action against Ancient Organics LLC concerning labels on its ghee product. The complaint alleged that the label’s statements—including “Eat Good Fat,” “the very best fat one can eat,” claims about vitamins and sustained energy, and an invitation to use the product as a “superfood”—led consumers to believe the product was healthy or healthier than competing products. Plaintiffs alleged that the product contained dangerously high levels of saturated fat.

The complaint asserted claims under California’s Consumer Legal Remedies Act, Unfair Competition Law, and False Advertising Law, along with claims under consumer-protection laws in ten other states and an unjust-enrichment claim. Ancient Organics moved to dismiss under Federal Rules of Civil Procedure 12(b)(1), which concerns subject-matter jurisdiction, and 12(b)(6), which concerns whether a complaint adequately states a legal claim.

Federal preemption and label claims

The court rejected plaintiffs’ theory that the label made implied nutrient-content claims about the amount of fat in the product. The court explained that federal food-labeling rules regulate statements about the amount of fat, not statements about the quality or value of the fat. Because the label did not claim that the product was low in fat, the court held that plaintiffs could not proceed on that theory. The court also held that claims based on allegedly missing mandatory disclosure statements were preempted by federal law.

The court separately held that plaintiffs plausibly alleged that the label was misleading under the reasonable-consumer standard. The complaint adequately alleged that consumers could understand the statements to mean that the product was healthy or healthier than competing products, while the product’s saturated-fat content allegedly made it unhealthy or dangerous. The court rejected Ancient Organics’ argument that all of the statements were nonactionable “puffery,” meaning vague promotional language that consumers cannot reasonably rely on. It found only the statement describing the product as a “superfood” to nourish the body, mind, and soul to be puffery.

Standing and proposed classes

The court denied the motion concerning products that plaintiffs had not personally purchased, but limited the surviving claims to the 32-ounce product size because the complaint did not identify the purchased size with enough specificity. The court noted that whether plaintiffs could represent purchasers of other sizes could be addressed only if the pleadings supplied more specific details.

The court granted the motion as to the proposed Multi-State Consumer Class. The named plaintiffs purchased the product in Northern California and did not allege that they were injured in any other state, so they had not established standing to assert claims under the laws of the other states. The court granted leave to amend so plaintiffs could add named representatives with individual standing to assert those claims.

The court denied the motion as to the proposed Nationwide Class. It held that plaintiffs adequately alleged that the challenged conduct occurred in California and that Ancient Organics had not shown, at this stage, that another state’s law should apply. The court noted that applying California law to a nationwide class could present difficulties later.

Unjust enrichment

The court recognized that California does not treat unjust enrichment as a standalone cause of action, but said such a claim may be construed as a quasi-contract claim seeking restitution. Because Ancient Organics did not challenge the substance of the unjust-enrichment allegations, the court denied the motion on that ground and allowed the claim to proceed subject to further refinement and possible integration with the other claims.

Disposition

The court granted in part and denied in part the motion to dismiss. It granted the motion with respect to Count V, with leave to amend to add additional out-of-state named plaintiffs. It denied the motion with respect to Counts I, II, III, and IV, but those claims could not proceed on theories involving illegal implied nutrient-content claims, missing mandatory disclosure statements, or the “superfood” statement. The surviving claims were limited to the 32-ounce product size unless plaintiffs amended their allegations concerning other labels. Any amended pleading had to be filed within 28 days of the order.