Brown v. Kerry Inc.

Background

Jaclynn Brown filed a putative class action concerning Oregon Chai’s “Chai Tea Latte” product. The caption named Kerry Inc., which the opinion identifies as Oregon Chai’s parent company, but the parties later stipulated to substitute Oregon Chai as the defendant. Brown alleged that the product’s “Slightly Sweet” labeling led consumers to believe it was low in sugar. She alleged that each serving contained 11 grams of sugar, that this exceeded the Food and Drug Administration’s definition of “low sugar,” and that she paid $4.99 for a 32-ounce package after relying on the label.

The complaint asserted claims under Sections 349 and 350 of the New York General Business Law, negligent misrepresentation, fraud, unjust enrichment, breach of express and implied warranties under New York law, and the Magnuson-Moss Warranty Act.

Motion and Report

Oregon Chai moved to dismiss under Federal Rules of Civil Procedure 12(b)(1), for lack of subject-matter jurisdiction, and 12(b)(6), for failure to state a legally sufficient claim. The court referred the motion to Magistrate Judge James L. Cott. Judge Cott recommended granting the motion under Rule 12(b)(6). Neither party objected.

Because there were no objections, Judge Gardephe reviewed the recommendation for clear error. He found the recommendation thorough, well reasoned, and free of clear error, and adopted it in its entirety as to dismissal of Brown’s claims.

Standing

Judge Cott rejected the argument that Brown lacked standing to bring her claims. Brown alleged that she would not have purchased the product, or would have paid less for it, without the alleged misleading label. The recommendation treated those allegations as sufficient to plead actual injury. It concluded separately that Brown lacked standing to seek injunctive relief because she was aware of the alleged misrepresentation and therefore would not be harmed in the same way again absent an injunction.

New York Consumer-Protection Claims

Sections 349 and 350 of the New York General Business Law prohibit deceptive consumer practices and false advertising. The court concluded that Brown had not plausibly alleged that “Slightly Sweet” was materially misleading.

The recommendation treated “Slightly Sweet” as a subjective description of taste, not an objective statement about the product’s sugar content. Because the phrase supplied no measurement of sugar and could not be proved true or false in that sense, the recommendation characterized it as nonactionable puffery. The product’s labeling as a whole also referred to consumers’ palates and included nutritional information stating the amount of sugar and calories. The court concluded that this information dispelled confusion about sugar content. It also found that Brown’s consumer surveys did not show that consumers understood “Slightly Sweet” to mean “low sugar” or “low calorie.”

Negligent Misrepresentation, Fraud, and Unjust Enrichment

The negligent-misrepresentation, fraud, and unjust-enrichment claims were based largely on the same alleged deception and therefore failed for the same reason as the consumer-protection claims.

The negligent-misrepresentation claim also failed because Brown did not adequately allege a special relationship requiring Oregon Chai to provide correct information. The opinion states that the complaint described ordinary commercial transactions rather than a relationship approaching a contractual or similarly close relationship.

The fraud claim failed to satisfy the requirement that fraud be pleaded with particularity and that the complaint provide facts creating a strong inference of fraudulent intent. The allegation that Oregon Chai knew its front-label statements were inaccurate and misleading was conclusory and did not meet that requirement.

The unjust-enrichment claim was duplicative of Brown’s central deception theory. The recommendation concluded that unjust enrichment could not cure defects in the other claims.

Warranty and Magnuson-Moss Claims

The complaint alleged that “Slightly Sweet” was an express warranty that the product was low in sugar. The court concluded that the phrase was not a factual representation about the amount of sugar. The claim also failed because Brown did not allege that she gave the seller the notice of breach required by New York law. Alleged complaints from other consumers did not satisfy that requirement.

The implied-warranty claim failed because Brown did not adequately allege the defendant’s pre-suit knowledge and did not provide facts showing that the product was unfit for ordinary human consumption. The Magnuson-Moss Warranty Act claim failed because Brown had not plausibly alleged an underlying express or implied warranty breach and had not alleged the existence of a written warranty as required by that statute.

Disposition

The court adopted the Report and Recommendation, dismissed Brown’s claims under Rule 12(b)(6), and directed the Clerk to terminate the dismissal motion. The court also adopted the recommendation that Brown be granted leave to amend. Any motion for leave to file an amended complaint was due by March 21, 2022, and the proposed amended complaint had to be attached to the motion. The opinion does not specify whether the dismissals were with or without prejudice.