In re Kind LLC "Healthy & All Natural" Litig.

209 F.Supp.3d 689

IN RE: KIND LLC "HEALTHY AND ALL NATURAL" LITIGATION

This Document Relates to All Actions

15-MD-2645 (WHP)

15-MC-2645 (WHP)

United States District Court, S.D. New York.

Signed September 15, 2016

OPINION & ORDER

WILLIAM H. PAULEY III, District Judge:

Plaintiffs bring this putative class action alleging that KIND LLC and KIND Management, Inc. (together, "KIND") deceptively marketed certain products as "healthy," "all natural," and/or "non GMO." The Consolidated Class Action Complaint (ECF No. 52) asserts claims for breach of express warranty, unjust enrichment, and negligent misrepresentation, as well as violations of New York General Business Law §§ 349, 350 ("GBL"); California's Consumers Legal Remedies Act, Cal. Civ. Code § 1750 ("CLRA"); the California False Advertising Law, Cal. Bus & Prof. Code § 17500 ("FAL"); the California Unfair Competition Act, Cal. Bus & Prof. Code § 17200 ("UCA"); the Illinois Consumer Fraud and Deceptive Business Practices Act, 815 Ill. Cop. Stat. 505/1 ("ICFDBPA"); and the Florida Deceptive and Unfair Trade Practices Act, Fla. Stat. §§ 501.201, et seq ("FDUTPA"). Plaintiffs seek to represent a national class of all individuals who purchased certain KIND products since April 17, 2011, as well as subclasses of purchasers from New York, California, Illinois and Florida.

KIND moves to dismiss Plaintiffs' claims or, in the alternative, to stay the action pending the Food and Drug Administration's ("FDA's") promulgation of rules addressing use of the word "natural" on food labels. Plaintiffs' "healthy" claims are dismissed, and the "all natural" claims are stayed pending the FDA's rulemaking process. To the extent Plaintiffs assert a separate claim concerning representations that products were "non GMO," that claim is dismissed without prejudice.

BACKGROUND

I. Plaintiffs' Allegations

KIND markets, advertises, and distributes popular snack foods with labels that include the words "Healthy," "All Natural" and "Non GMO." (Compl. ¶ 1.) Plaintiffs allege that KIND uses these descriptors to capitalize on the highly profitable and fast-growing health food market. (Compl. ¶¶ 19-22.)

In March 2015, the Food and Drug Administration ("FDA") issued a "warning letter" challenging, among other things, the following "about KIND" statement that appeared on some labels:

At KIND we do things differently and try to avoid false compromises. Instead of "or" we say "and ." Healthy and tasty, convenient and wholesome, economically sustainable and socially impactful.

Specifically, the FDA asserted that KIND'S "healthy and tasty" language was an "implied nutrient content claim" subject to regulations set forth in 21 C.F.R. § 101.65, and that certain KIND products did not meet the FDA's saturated fat content requirements necessary to describe food as "healthy." (ECF 52-1, Ex. A at 1-2.)

That warning letter spawned numerous copycat private actions—eventually consolidated in this MDL—alleging that consumers were somehow deceived by the "about KIND" statement. In response, KIND protested that many universally recognized healthy foods such as almonds, avocados, or salmon contain saturated-fat levels exceeding the limits prescribed by 21 C.F.R. § 101.65. Eventually, in April 2016—after the briefing of KIND'S motion to dismiss in this action but prior to oral argument—the FDA withdrew its objections and conceded that its "regulations concerning nutrient content claims are due for a reevaluation in light of evolving nutrition research." (ECF No. 73-5.) One month later, Plaintiffs voluntarily dismissed their "healthy" claims. (ECF No. 74.)

Plaintiffs also allege that rather than being "all natural," KIND products contain synthetic, chemically synthesized, and highly processed ingredients such as soy lecithin, soy protein isolate, citrus pectin, glucose syrup, vegetable glycerine, palm kernel oil, canola oil, ascorbic acid, vitamin A acetate, D-Alpha tocopheryl acetate, and annatto. According to Plaintiffs, these ingredients render KIND'S labeling false and misleading based on the New Oxford American Dictionary's definition of "natural" as "existing in or caused by nature; not made or caused by humankind."

(Compl. ¶ 40.)¹ Additionally, Plaintiffs allege that "[t]esting has detected the presence of GMOs in at least some of the products" (Compl. ¶ 38), and that "approximately 90% of canola, 89% of corn, and 94% of soybeans grown in the United States are genetically modified, as are a majority of U.S. sugar beet crops." (Compl. ¶ 48.) "The World Health Organization defines [GMOs] as ‘organisms in which the genetic material (DNA) has been altered in a way that does not occur naturally.’ " (Compl. ¶ 2.)

II. The FDA's "Natural" Guidance

The Federal Food, Drug, and Cosmetic Act of 1938 ("FDCA"), Pub. L. No. 75-717, 52 Stat. 1040 (1938), established the FDA within the Department of Health and Human Services. See 21 U.S.C. § 393. "The FDCA grants the FDA authority to regulate the field of food safety." Fellner v. Tri – Union Seafoods, L.L.C. , 539 F.3d 237, 251 (3d Cir.2008) (citing 21 U.S.C. § 371 ). The Nutrition Labeling and Education Act of 1990 ("NLEA"), Pub. L. No. 101–535, 104 Stat. 2353 (1990) (codified at 21 U.S.C. § 343 ), further reformed and standardized the requirements for nutrition labeling and health claims on nearly all food products. See Holk v. Snapple Beverage Corp. , 575 F.3d 329, 332 (3d Cir.2009).

In November 2015, the FDA "announc[ed] the establishment of a docket to receive information and comments on the use of the term ‘natural’ in the labeling of human food products, including foods that are genetically engineered or contain ingredients produced through the use of genetic engineering." Use of the Term "Natural" in the Labeling of Human Food Products; Request for Information and Comments , 80 FR 69905-01, 2015 WL 6958210. At that time, the FDA noted that citizen petitions and courts "requested administrative determinations from FDA regarding whether food products containing ingredients produced using genetic engineering or foods containing high fructose corn syrup may be labeled as ‘natural.’ " Use of the Term "Natural" , 2015 WL 6958210. Among other things, the FDA solicited comments and proposals addressing: (1) the "type(s) of ingredients [that] would disqualify the food from bearing the term [natural]"; (2) whether "the manner in which an ingredient is produced or sourced [should] affect whether a food containing that ingredient may be labeled as ‘natural’ "; (3) whether "certain production practices used in agriculture, for example, genetic engineering ... be a factor in defining ‘natural’ "; and (4) whether "the term ‘natural’ [should] only apply to ‘unprocessed’ foods [and i]f so, how should ‘unprocessed’ and ‘processed’ be defined[?]" Use of the Term "Natural" , 2015 WL 6958210. The notice and comment period ended in May 2016.

LEGAL STANDARD

On a motion to dismiss, the factual allegations in a complaint are accepted as true and all reasonable inferences are drawn in the plaintiff's favor. Rescuecom Corp. v. Google Inc. , 562 F.3d 123, 127 (2d Cir.2009). To survive a motion to dismiss, "a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (citation omitted); Ruston v. Town Bd. for Town of Skaneateles , 610 F.3d 55, 59 (2d Cir.2010).

However, a claim must rest on "factual allegations sufficient to raise a right to relief above the speculative level. " Bell Atl. Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A pleading offering "labels and conclusions" or a "formulaic recitation of the elements of a cause of action" fails to state a claim. Iqbal , 556 U.S. at 678, 129 S.Ct. 1937 (citation omitted).

DISCUSSION

After briefing on the motion to dismiss was complete but prior to oral argument, Plaintiffs voluntarily dismissed their "healthy" claims. (ECF 74.) Defendants move to stay Plaintiffs' "all natural" claims under the primary jurisdiction doctrine, and further argue that Plaintiffs fail to plead a "non GMO" claim separate from the "all natural" claims.

I. Plaintiffs' "Healthy" Claims

Because plaintiffs Kaufer, Karnezis and Livingston are only alleged to have purchased KIND products "in reliance on the representations on the product labels that the products were ‘healthy’ " (Compl. ¶¶ 11, 13, 14)—and not in reliance on any "all natural" representations—their claims are dismissed. And because Karnezis and Livingston are the only plaintiffs from Illinois and Florida, respectively, Plaintiffs' ICFDBPA and FDUTPA claims and the Illinois and Florida subclasses are likewise dismissed.

II. Plaintiffs' "All Natural" Claims

"The doctrine of primary jurisdiction is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties. Thus, the doctrine's central aim is to allocate initial decision-making responsibility between courts and agencies and to ensure that they do not work at cross-purposes." All Am. Tel. Co. v. AT & T, Inc. , No. 07–cv–861 (WHP), 2010 WL 7526933, at *1 (S.D.N.Y. Jan. 19, 2010) (internal citations and quotation marks omitted). "Recourse to the doctrine of primary jurisdiction is ... appropriate whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body." Ellis v. Tribune Television Co. , 443 F.3d 71, 81 (2d Cir.2006) (quotation marks omitted). "The ... doctrine is rooted in part in judicial efficiency." United States v. Philip Morris USA Inc. , 686 F.3d 832, 838 (D.C.Cir.2012).

Recent Ninth Circuit precedent strongly supports KIND'S argument that Plaintiffs' "all natural" claims should be stayed pending the FDA's rulemaking process. In Astiana v. Hain Celestial Grp., Inc. , 783 F.3d 753 (9th Cir.2015), the Ninth Circuit held...