Prescott v. Nestle USA, Inc

Background

Steven Prescott and Linda Cheslow filed a putative class action concerning Nestlé’s “Nestlé Toll House Premier White Morsels.” They alleged that the product’s name, package images, and placement near other chocolate products caused them to believe that the product contained white chocolate, although it did not. They sought to represent a nationwide class or, alternatively, a California class of people who bought the product for personal consumption.

The plaintiffs asserted claims under California’s Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act. They sought restitution and injunctive relief. The complaint alleged, among other things, that a consumer study found that approximately 95% of respondents believed the product contained white chocolate and that consumers had complained that the product did not melt like chocolate during baking.

Earlier Proceedings and Remand

The court had previously granted Nestlé’s motion to dismiss the second amended complaint under Federal Rule of Civil Procedure 12(b)(6), which permits dismissal when a complaint does not adequately state a claim for relief. The earlier order concluded that the plaintiffs had not plausibly alleged that a reasonable consumer was likely to be deceived and had not established standing to seek injunctive relief. The court entered judgment for Nestlé.

While the plaintiffs’ appeal was pending, the California Court of Appeal decided Salazar v. Walmart, Inc. In that case, the court held that allegations involving similarly labeled white baking chips presented a factual question about whether a reasonable consumer could be misled and could not generally be resolved at the pleading stage. The Ninth Circuit then vacated the earlier dismissal order and remanded the case for this court to consider the effect of that decision.

The Parties’ Arguments

Nestlé argued that the California decision did not change the prior analysis. It contended that the decision relied on California pleading standards and that the complaint still failed to satisfy federal pleading standards. Nestlé also argued that the California Supreme Court would not endorse the California Court of Appeal’s reasoning. Nestlé further argued that the product’s ingredient list on the back of the package clarified that it did not contain chocolate.

The plaintiffs argued that the California decision applied California’s substantive reasonable-consumer test to materially similar facts and claims, rather than relying only on a state procedural pleading standard. They also argued that the California Supreme Court would endorse the decision.

Court’s Analysis

The court concluded that the claims in this case and the claims in the California appellate decision appeared materially indistinguishable. Both involved white baking chips allegedly presented as white chocolate through the word “white,” package images, and placement near chocolate products. Because the case involved California state-law claims, the federal court applied the same California substantive law as the California Court of Appeal.

Under California’s reasonable-consumer test, a plaintiff must show that members of the public are likely to be deceived. The court determined that it was not appropriate at the pleading stage to decide as a matter of law that reasonable consumers could not be misled by Nestlé’s labeling. The court rejected Nestlé’s characterization of the California decision as involving only an ambiguity or a mere possibility of deception. It emphasized that the decision considered several alleged features of the packaging and product placement and concluded that a significant portion of consumers could reasonably be misled.

The court also declined at this stage to decide as a matter of law that “Premier White Morsels” was merely ambiguous or that the back label necessarily dispelled any deception on the front of the package. The court stated that a more developed record might provide Nestlé with a stronger argument concerning the back label.

The court concluded that the California Supreme Court would endorse the California Court of Appeal’s application of California law. It therefore denied Nestlé’s renewed motion to dismiss the claims under the Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act.

Injunctive Relief

The court separately addressed the plaintiffs’ request for injunctive relief. A plaintiff must establish standing separately for each form of relief requested. To seek an injunction, the plaintiffs had to show a likelihood that they would be wronged again without one.

The plaintiffs alleged that they would purchase the product in the future if it contained white chocolate, and might purchase it if the labeling made clear that it did not contain white chocolate but was sold at a lower price. The court found those allegations insufficient to establish standing. It also noted that the plaintiffs had not cited authority indicating that the court could order Nestlé to add white chocolate to the product or reduce its price.

Disposition

The court granted in part and denied in part Nestlé’s renewed motion to dismiss. It granted the motion, without leave to amend, only as to the plaintiffs’ claim for injunctive relief. It otherwise denied the motion. Nestlé was ordered to file its answer within 30 days.