Davidson v. Sprout Foods, Inc.

106 F.4th 842

Gillian DAVIDSON; Samuel Davidson, as individuals, on behalf of themselves,the general public, and those similarly situated, Plaintiffs-Appellants, v. SPROUT FOODS, INC., Defendant-Appellee.

No. 22-16656

United States Court of Appeals, Ninth Circuit

Argued and Submitted November 9, 2023 Phoenix, Arizona

Filed June 28, 2024

Appeal from the United States District Court for the Northern District of California, Richard Seeborg, Chief District Judge, Presiding, D.C. No. 3:22-cv-01050-RS

Matthew T. McCrary (argued), Gutride Safier LLP, Boulder, Colorado; Seth A. Safier, Gutride Safier LLP, San Francisco, California; for Plaintiff-Appellant.

Chad R. Fears (argued), Joshua D. Cools, Haley E. LaMorte, Evans Fears Schuttert McNulty & Mickus LLP, Las Vegas, Nevada; Elizabeth V. McNulty and Joshua D. Cools, Evans Fears Schuttert McNulty & Mickus LLP, Irvine, California; for Defendant-Appellee.

Before: Mary M. Schroeder, Daniel P. Collins, and Roopali H. Desai, Circuit Judges.

Opinion by Judge Schroeder;

Partial Concurrence and Partial Dissent by Judge Collins

OPINION

SCHROEDER, Circuit Judge:

INTRODUCTION

California's analog to the federal Food Drug and Cosmetic Act (FDCA) is known as the Sherman Law. It incorporates by reference all federal food labeling standards. These include a prohibition against labeling the front of baby food containers with the product's nutrient content. Sprout Foods, Inc. (Sprout), the Defendant-Appellee, nevertheless produced pouches of baby food with labels on the front of the package conspicuously stating the amount of nutrients the pouches contained. Gillian and Samuel Davidson, the plaintiff-appellants, purchased some of the pouches.

The Davidsons filed this putative class action in federal court claiming violation of California's Unfair Competition Law, and alleging the pouch labels violate the Sherman Law.¹ The amended complaint also contained state law claims of false advertising, fraud, and deception, alleging that the nutrient content labels misled consumers into believing the products were good for babies when they were actually harmful.

The district court dismissed the complaint for failure to state a claim. It held that the Sherman Law claim was impliedly preempted because the Sherman Law is derived from the FDCA, and the federal law calls for federal government enforcement. The federal law, however, expressly permits states to enact standards identical to the federal standards and in this case, plaintiffs are attempting to enforce identical standards set forth in a state statute, the Sherman Law. The federal law does not limit the manner in which the state statute is enforced, and private enforcement of that statute does not conflict with federal enforcement of the FDCA. We therefore conclude that the federal law does not preempt private enforcement of the Sherman Law's labeling requirements, and we reverse the district court's dismissal of the Sherman Law claim.

The district court also dismissed the fraud-based claims for failure to plausibly allege the products were misleading. We affirm the district court's dismissal of these claims, because they do not meet the elevated pleading standards of Federal Rule of Civil Procedure 9(b).

FACTUAL AND PROCEDURAL BACKGROUND

This case is about the relationship between the federal labeling requirements for baby food and the identical California labeling requirements. The umbrella federal statute, the FDCA, provides, with limited exceptions, that the law can be enforced only by the federal government. Nevertheless, the federal food labeling statute, the Nutrition Labeling and Education Act (NLEA), permits states to enact labeling standards so long as they are identical to the federal standards. California has done that. Plaintiffs therefore claim that Sprout has violated the California requirements.

The principal legal question in the case is whether the California requirements can be privately enforced or whether the federal limitation, effectively preventing private enforcement of the federal law, preempts private enforcement of the state standards. The regulatory background is therefore important to understanding the relationship between the federal and state labeling standards.

Food labeling has traditionally been the province of the states, and California has made the false or misleading labeling of food unlawful at least since 1939. See Cal. Health & Safety Code § 110660, previously codified as Cal. Health & Safety Code § 26490. In 1970, California enacted more modern and comprehensive provisions, known as the Sherman Law. See 1970 Cal Stat. ch. 1573.

Congress in 1990 amended the FDCA by enacting the NLEA in order to provide nationally uniform standards for nutrition labeling. The law was intended to displace disparate state standards. See 21 U.S.C. § 343-1. It contains an express preemption provision that allows states to enact only standards identical to federal law. Id. California then amended the Sherman Law to incorporate all federal standards, thereby ensuring that California standards will be the same as the federal standards and not be preempted. Cal. Health & Safety Code § 110100(a).

The relevant federal regulation prohibits "nutrient content claims . . . on food intended for use by infants and children less than 2 years of age." 21 C.F.R. § 101.13(b)(3). California law incorporates the same prohibition. See Cal. Health & Safety Code § 110100(a).

In setting out its reason for the prohibition, the FDA essentially explained that what is good for adults may not be so good for babies. See Food Labeling: Nutrient Content Claims, General Principles, Petitions, Definition of Terms, 56 Fed. Reg. 60421, 60424 (Nov. 27, 1991). The agency pointed to a general agreement among associations of health professionals that fat and cholesterol should not be restricted in the diets of infants. Id. The agency also said that it lacked evidence that restricting nutrients like sodium or increasing intake of nutrients such as fiber would be beneficial for infants and toddlers. Id. It therefore concluded that until it had such evidence, it was prohibiting nutrient content claims on food products intended for babies under two. Id. The agency was clearly concerned that such labeling could lead consumers to believe that a product was good for babies when the agency had no basis for such conclusions.

Sprout sells baby and toddler food products under its label, including pouches of pureed food intended for babies under two. The front of the pouches have labels that prominently feature statements of the nutrient content of the food inside. The example alleged in the amended complaint and cited by the district court was "3g of Protein, 5g of Fiber and 300mg Omega-3 from Chia ALA." These types of claims on the labels of the Sprout pouches appear to be what the FDA regulation and, by extension, the Sherman Law prohibit.

This is an example:

Image materials not available for display.

The parties agree that the federal statute does not expressly preempt private enforcement of the state standards. It expressly preempts only state standards that deviate from the federal. 21 U.S.C. § 343-1(a). Still, the Supreme Court has recognized that preemption of state law may be implied where preemption "was the clear and manifest purpose of Congress." Altria Grp., Inc. v. Good, 555 U.S. 70, 77, 129 S.Ct. 538, 172 L.Ed.2d 398 (2008) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230, 67 S.Ct. 1146, 91 L.Ed. 1447 (1947)). We have, for example, said state law is impliedly preempted when it stands in the way of fulfilling a Congressional objective. See McClellan v. I-Flow Corp., 776 F.3d 1035, 1039 (9th Cir. 2015). There have been a number of cases filed in federal district courts in California where private parties sought to enforce the provisions of the California Sherman Law that parallel the federal law, but this is the first to reach this court.

The plaintiffs in this case, Gillian and Samuel Davidson, filed this diversity action in district court seeking to represent a class of consumers who purchased Sprout's products, beginning in 2018. Plaintiffs asserted a claim that Sprout's conduct was "unlawful" under California's Unfair Competition Law (UCL) because the Sprout pouches were labeled in violation of California's Sherman Law. See Cal. Bus. & Prof. Code § 17200 (UCL). Plaintiffs also invoked the California False Advertising Law (FAL), the California Consumer Legal Remedies Act (CLRA), the UCL, and common law fraud to contend that the labeling was fraudulent and misleading in that the labeling led purchasers to believe the products were good for babies when they were actually harmful. See Cal. Bus. & Prof. Code § 17500, (FAL); Cal. Civ. Code § 1770 (CLRA).

Sprout moved to dismiss the First Amended Complaint under Rule 12(b)(6) for failure to state a claim. The district court granted the motion in its entirety. The court dismissed the Sherman Law claim as impliedly preempted by the federal statute, reasoning that because the Sherman Law depends upon and "adopts the FDCA and regulations as state law," the claim was essentially governed by the federal law that barred private enforcement.

The district court also dismissed the claims sounding in fraud. The district court accepted for purposes of surviving a motion to dismiss, that plaintiffs had plausibly alleged the nutrient content labels imply health benefits. But it ruled plaintiffs had failed to plausibly allege that this implied message was misleading because they did not sufficiently allege that the products caused harm. The court dismissed under Rule 9 with further leave to amend, but plaintiffs chose to stand on their First Amended Complaint and appeal.

In this appeal, they first argue that the district court erred in holding their Sherman Law claim was impliedly preempted. Plaintiffs contend that because they are seeking to enforce the parallel state law that Congress intended states to enact, the...