A San Jose federal judge has ruled food maker Nestle can't melt away a class action lawsuit accusing them of misleading consumers by allegedly selling white baking chips that allegedly don't actually contain white chocolate.
On April 12, U.S. District Judge Beth Labson Freeman, of the Northern District of California, ruled in favor of Steven Prescott and Linda Cheslow, who are serving as lead plaintiffs in the lawsuit against Nestle USA Inc.
In the decision, Judge Labson Freeman said a recent ruling from a California state appeals court in a nearly identical case against Walmart locks Nestle into future court dates to weigh evidence to determine the legitimacy of the plaintiffs' claims.
U.S. District Judge Beth Labson Freeman
| law.com
The lawsuit has been in court since 2019, when attorneys from the Clarkson Law Firm, of Malibu, filed it in Santa Cruz County Superior Court. Nestle removed the case to federal court in San Jose.
The lawsuit accuses Nestle of violating California's Unfair Competition Law and state law prohibiting allegedly false and misleading advertising.
Specifically, the lawsuit claims Nestle relied on its reputation to allegedly mislead consumers to believe its Toll House Premier White Morsels contain white chocolate.
While the label does not state it contains white chocolate, or any kind of chocolate, the complaint asserts by selling the "white morsels" next to its other branded bags of chocolate chips - all of which contain chocolate - "reasonable consumers are misled into believing the Product contains white chocolate when it actually contains fake white chocolate but has thus far refused to make any labeling and advertising changes to dispel the consumer deception."
Further, the complaint asserts Nestle's label boasts the morsels contain "premium" ingredients, when they allegedly contain "artificial flavors" and "hydrogenated oils."
"Indeed, Nestle is synonymous with chocolate, not oil," the complaint stated.
Nestle responded by seeking to persuade the federal judge to dismiss the lawsuit, claiming, in part, there is no basis to accuse the company of actually marketing its "white morsels" as containing chocolate.
The judge sided with Nestle, and plaintiffs appealed to the U.S. Ninth Circuit Court of Appeals.
In the meantime, however, a panel of the California Fifth District Appellate Court in considering a nearly identical case against Walmart ruled the world's largest retailer couldn't quickly escape a class action also accusing the retailer of misleading consumers about the chocolate content of its store brand white baking morsels.
The state appeals court rejected Walmart's attempt to dismiss, declaring that more proceedings are needed to verify both the plaintiffs' claims and the retailer's defense.
In response to that ruling, the Ninth Circuit directed Judge Labson Freeman to take another look at the case against Nestle in light of the Ninth Circuit's ruling.
And the judge determined the decision in the Walmart case now means Nestle, like Walmart, has more work to do to defeat the class action.
"At this juncture, ... the Court is not prepared to determine as a matter of law that 'Premier White Morsels' on the front packaging is merely ambiguous rather than 'an act of deception,' thus compelling the consumer to also read the back label," the judge wrote. "Nor is the court prepared to determine as a matter of law whether reference to the back label of the Product 'can ameliorate any tendency of a label to be misread.'
"... This court is wholly unpersuaded by Nestle's argument that Walmart may be disregarded on the basis that it was grounded in legal standards that are not applicable here ... The Ninth Circuit clearly indicated that this Court should follow Walmart's 'persuasive' application of California's reasonable consumer standard absent a determination that the California Supreme Court would not endorse Walmart."
The judge further said she could not see how the California state Supreme Court would deliver such a holding, either, as she "is at a loss to understand how Walmart may be viewed as conflicting with California law..."
The judge, however, sided with Nestle on the plaintiffs' request for an injunction, saying she did not believe at this point it would be within her power to "order Nestle to include white chocolate in its Product, or to decrease the price of its Product to an amount Plaintiffs deem fair for non-chocolate baking morsels."
Plaintiffs are represented by attorneys Ryan J. Clarkson, Bahar Sodaify, Kelsey Elling and Ryan D. Ardi, of the Clarkson Law Firm.
Nestle has been represented by attorneys Dale J. Giali and Keri E. Borders, of the firm of King & Spalding, of Los Angeles.