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1 June 2011

Courts In California Divide Over Whether False Advertising Lawsuits Can Be Dismissed At The Pleading Stage

Two courts in California issued decisions on May 26, 2011, on the legal sufficiency of complaints alleging false and deceptive advertising. In both cases, plaintiffs sued on behalf of consumer classes under California’s consumer protection laws. And that’s where the similarity ends.

In the first case, the plaintiff sued in state court, alleging that the defendant used the image of a green drop of water on the label of Fiji bottled water to suggest that the products were environmentally superior to the defendant’s competitors. Hill v. Roll Int’l Corp., No. A128698, --- Cal.App.4th --- (Ct. App. May 26, 2011). The plaintiff contended instead that Fiji bottled water products “cause as much, if not more, environmental damage” as the water sold by Fiji’s competitors. Plaintiff asserted false advertising claims under California’s Unfair Competition Law, False Advertising Law and Consumers Legal Remedies Act, as well as a claim for common law fraud. The trial court dismissed an amended complaint (“sustained a demurrer,” in California parlance) and denied further leave to amend. The California Court of Appeal issued a precedential decision affirming the dismissal. The court confirmed the principle that assessment of false advertising under California consumer protection laws begins and ends with the “reasonable consumer” standard. Most significantly, the court underscored that the application of the standard is a legal question that a court may resolve on the pleadings. Under the test enunciated in Hill, a plaintiff must allege facts demonstrating that consumers acting reasonably under the circumstances likely would be deceived. As the court reasoned, “the standard is not a least sophisticated consumer . . . [n]or . . . the unwary consumer.” In what appears to be a subtle recognition of the lawyer-driven nature of many recent false advertising class actions, the court observed: “It follows, in these days of inevitable and readily available Internet criticism and suspicion of virtually any corporate enterprise, that a reasonable consumer also does not include one who is overly suspicious.” Applying this standard, the court concluded that a reasonable consumer would not likely think that the green drop on Fiji water bottles means that the product had been endorsed as environmentally superior. The court therefore rejected as legally insufficient and irrelevant the plaintiff’s say-so that she had been deceived, ultimately holding that a false advertising lawsuit can and should be thrown out at the pleading stage when the specific representations alleged in the complaint would not likely deceive a reasonable consumer.

The state court’s decision in Hill contrasts sharply with a decision issued on the same date by the federal court for the Northern District of California. Astiana v. Ben & Jerry’s Homemade, Inc., No. C10-4387 (N.D. Cal. May 26, 2011). In Astiana, plaintiffs are suing over the use of the phrase “All Natural” on the packaging of ice cream products, alleging that the products contain ingredients that are not natural. The court found the allegations to be legally sufficient at the pleading stage largely because the false advertising theory articulated by the complaint was based on specific facts alleged about the advertising at issue. Unlike the court’s analysis in Hill, the Astiana court held that, on a motion to dismiss, it would not analyze and assess whether a reasonable consumer likely would be deceived on the basis of the specific facts alleged in the complaint, even though the Astiana court specifically recognized that defendant’s “argument regarding the implausibility of the claim that plaintiffs (including the class) were deceived is somewhat persuasive.”   

The conflicting decisions in Hill and Astiana reflect an ongoing debate among courts in California—a hotbed of false advertising litigation relating to food and beverage products—over whether and under what circumstances such lawsuits may be dismissed at the pleading stage.  

For more information about the issues raised in this Legal Update, please contact Dale J. Giali or Michael L. Resch in our Los Angeles office or Carmine R. Zarlenga, Archis Parasharami, or Kevin S. Ranlett in our Washington office.

Learn more about our Consumer Litigation & Class Actions practice.

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