McNulty v. Polar Beverages Co., Inc.

Background

Kimberly McNulty brought a proposed consumer class action against Polar Corp. concerning flavored seltzer beverages labeled “100% NATURAL.” She alleged that she bought a Cranberry-Lime box for $4.99 at Target after reading the label. The complaint alleged that radiocarbon testing of product extracts showed estimated non-bio-based carbon content ranging from 58% to 96%, indicating the presence of artificial compounds. McNulty alleged that she would not have bought the products, or would have paid significantly less, if she had known they were not 100% natural.

The complaint asserted New York claims for deceptive trade practices under General Business Law Sections 349 and 350 and breach of contract. It sought monetary damages and declaratory relief. Polar moved to dismiss under Federal Rules of Civil Procedure 12(b)(1) and 12(c), arguing that McNulty lacked standing and that the complaint failed to state a claim. Polar also sought a stay while the Food and Drug Administration considered guidance concerning the term “natural.”

Standing and Declaratory Relief

The court held that McNulty lacked standing to seek declaratory relief because the complaint did not allege a sufficient likelihood of future injury. McNulty alleged that she would consider purchasing the products in the future only if they were made in conformity with the “100% NATURAL” representation. Because she did not allege that she would buy the products while they contained synthetic ingredients, the court found no likelihood that she would suffer the alleged harm again. The declaratory-relief claims were dismissed.

The court rejected Polar’s argument that McNulty lacked standing to assert damages claims concerning flavors she had not purchased. McNulty had standing based on her own purchase, and the products were sufficiently similar at this stage because they were all seltzer beverages, carried the same “100% NATURAL” label, and allegedly had the same type of deceptive marketing. The court stated that particular concerns about differences among the products could be addressed at class certification.

Rule 12(c) Arguments

The court rejected Polar’s argument that the testing allegations were implausible. Reading the complaint as a whole, the allegations could mean that the estimated percentages concerned flavoring ingredients rather than the products overall. The court also declined to consider certain assertions based on the answer to the earlier complaint and determined that the third-party flavor certifications were not documents on which the complaint relied heavily.

The court also rejected Polar’s federal-preemption argument. It held that Polar had not shown that the Food, Drug, and Cosmetic Act, the Nutrition Labeling Education Act, or the Food and Drug Administration’s 1991 notice expressly preempted the state-law claims. The court noted that the Food and Drug Administration had not created a rule defining when food products may be labeled “natural,” and that the 1991 notice was nonbinding guidance. The court further stated that the breach-of-contract claim was not preempted because it concerned an alleged contractual commitment by a manufacturer rather than a state-law requirement.

New York Consumer-Protection Claims

The court held that the complaint adequately alleged injury under a price-premium theory for claims under General Business Law Sections 349 and 350. McNulty alleged that Polar’s representation enabled it to charge more, that she would have paid significantly less if she had known the products were not 100% natural, and that she did not receive the value promised. The court found those allegations sufficient at the pleading stage. The motion was denied as to the Sections 349 and 350 claims.

Breach of Contract

The court dismissed the breach-of-contract claim for lack of privity, meaning the complaint did not allege a direct contractual relationship between McNulty and Polar. The complaint alleged that McNulty purchased the products from Target, not directly from Polar, and did not allege facts supporting an exception such as a third-party-beneficiary or agency theory. McNulty also expressly renounced a breach-of-express-warranty claim; to the extent she asserted a different common-law warranty claim, the court found it inadequately pleaded.

Request for a Stay and Disposition

The court denied Polar’s application to stay the case under the primary-jurisdiction doctrine. Although determining whether particular ingredients are “natural” could involve the Food and Drug Administration’s expertise, the court found that deciding whether the label would mislead a reasonable consumer was within the conventional experience of judges and juries. It also found that the risk of inconsistent rulings did not strongly support a stay.

Judge Lorna G. Schofield’s conclusion states that Polar’s motion under Rules 12(b)(1) and 12(c) was granted with respect to the declaratory-relief claims and the breach-of-contract claim, but denied with respect to the General Business Law claims. The application for a stay was denied.