Reyes v. Upfield US Inc.

Background

Joanna Reyes brought a proposed class action against Upfield US Inc., alleging that Country Crock plant butter was deceptively labeled. The front label described the product as “Plant Butter,” “Dairy Free,” a “79% Plant-Based Oil Spread,” and “Made With Almond Oil,” and included pictures of almonds, an almond flower, and almond leaves. Reyes alleged that almond oil was listed after palm fruit, palm kernel, and canola oil in the ingredient list, making it the least predominant of the listed oils. She claimed that consumers would expect a significant, non-negligible amount of almond oil and that she paid a premium price because of the labeling.

Reyes asserted claims under §§ 349 and 350 of the New York General Business Law, common-law breach of express warranty, common-law fraud, and unjust enrichment. Upfield moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(6), arguing that the labeling was not misleading, Reyes had not adequately alleged injury, her common-law claims were deficient, federal law preempted the state-law claims, and the court lacked personal jurisdiction over claims by potential out-of-state class members.

New York consumer-protection claims

The court treated the claims under General Business Law §§ 349 and 350 together. It held that Reyes adequately alleged consumer-oriented conduct because Upfield marketed and sold the product to consumers. It also held that she adequately alleged injury under a price-premium theory by claiming that she relied on specific front-label statements, would not have bought the product if she had known the truth, and would not have paid as much without the alleged misrepresentations.

The court further held that Reyes plausibly alleged materially misleading conduct. Relying on Second Circuit precedent concerning predominant-ingredient representations, the court concluded that a reasonable consumer could understand “Made With Almond Oil” on a plant-butter product to suggest that almond oil was a major plant-based ingredient. The ingredient list did not necessarily cure the alleged misleading impression because a reasonable consumer was not required to consult the ingredient list to correct prominent statements on the front of the package. The court therefore denied Upfield’s motion to dismiss the General Business Law claims.

Preemption

The court rejected Upfield’s argument that federal food-labeling law preempted Reyes’s state-law claims. It explained that federal law preempts state requirements that differ from federal requirements concerning certain nutrient-content claims. But the court concluded that “Made with Almond Oil” was a valued-ingredient statement, not a claim characterizing the level of a regulated nutrient. The state-law claims therefore were not preempted.

Other claims

The court dismissed the express-warranty claim because Reyes did not adequately allege that she gave Upfield pre-suit notice of the alleged breach. General allegations that Upfield knew about consumer complaints and that Reyes provided notice were insufficient because the complaint did not provide specific facts, such as the date and method of notice.

The court dismissed the fraud claim because Reyes did not plead facts creating a strong inference that Upfield acted with fraudulent intent. The alleged desire to increase sales and profits was only a general profit motive and did not satisfy the heightened pleading requirements for fraud.

The court dismissed the unjust-enrichment claim as duplicative. It was based on the same facts as Reyes’s other claims and did not allege distinct damages.

Out-of-state putative class claims

The court denied without prejudice Upfield’s request to dismiss claims involving potential out-of-state class members for lack of personal jurisdiction. It held that this issue would be better evaluated at the class-certification stage rather than on the motion to dismiss.

Disposition

Judge Kenneth M. Karas granted in part and denied in part Upfield’s motion to dismiss. Reyes’s General Business Law claims survived, while her express-warranty, fraud, and unjust-enrichment claims were dismissed without prejudice. Because this was the first adjudication of the claims on the merits, the court allowed Reyes 30 days to file an amended complaint addressing the deficiencies. The court also scheduled a status conference for October 26, 2023.