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Tough Nut to Crack: First Circuit Panel Splits on Reasonable Interpretation of Flavored Coffee Packaging

We have written previously about application of the “reasonable consumer” standard when labeling statements are claimed to be false or misleading, despite the presence of clarifying information elsewhere on the product label.  We’ve observed the inconsistent standards courts apply in ruling on a motion to dismiss, particularly as to whether a “reasonable consumer” views the alleged misstatement in the context of the entire product packaging and ingredient list.

The First Circuit’s split decision in Dumont v. Reily Foods Co., No. 18-2055 (1st Cir. Aug. 8, 2019), showcases different jurists’ conceptions of how a “reasonable consumer” reviews and interprets product labeling—in this case, a bag of “Hazelnut Crème” ground coffee.  The case includes a lively exchange between a majority that reversed the grant of a motion to dismiss in the manufacturer’s favor, and a dissent that believed the propriety of dismissal was not even a “close question.”

The defendant in Dumont, Reily Foods Company, manufactures New England Coffee brand “Hazelnut Crème” coffee:

     

As depicted above, the front of the label also includes the statements “FRESHLY GROUND” and “100% Arabica Coffee.”  In addition, the ingredients list on the back label states: “100% Arabica Coffee Naturally and Artificially Flavored.”

The parties agreed that the product does not contain any hazelnuts or hazelnut crème; rather the product contains hazelnut crème flavoring.  Plaintiff Dumont claimed that she purchased the coffee because she thought it contained hazelnuts, and so was misled into buying a product that she would not have bought otherwise.  Reily moved to dismiss the complaint, contending that it failed to state a claim with particularity and that, based on common sense and the disclosures on the packaging, a reasonable consumer would not be misled as Dumont alleged.  The district court granted the motion to dismiss, holding that the complaint failed Rule 9(b)’s particularity requirement because “the complaint offers insufficient detail regarding the circumstances of plaintiff’s purchase.” No. 18-cv-10907 (RWZ), 2018 U.S. Dist. LEXIS 166501 (D. Mass. Sept. 24, 2018).

On appeal, in a 2-1 decision, the First Circuit reversed the district court’s dismissal of the complaint.  As to the Rule 9(b) holding, the majority explained that the complaint was sufficiently particularized because it included the “who,” “what,” “where,” and “when” of the alleged fraud—and liability did not turn on more precise particularly as to any of these elements.  (The majority’s analysis here is surprisingly brief given the extraordinary generality of Dumont’s allegations: the “what” is “at least one package of [] Hazelnut Crème Coffee”; the “where” is “in Massachusetts”; and the “when” is “during the Class Period.”  And beyond alleging that she would not have purchased the product “if she had known it did not contain hazelnuts,” Dumont pleaded no support for the questionable proposition that consumers buy hazelnut crème coffee for the hazelnuts).

The majority then turned to the alternate basis to dismiss under Rule 12(b)(6) and the “reasonable consumer” standard—i.e., “whether the label had the capacity to mislead consumers, acting reasonably under the circumstances, to believe that the coffee contained some hazelnut.”

The majority explained that this was a “close question,” but held it could not be answered as a matter of law.  Rather, a reasonable consumer could conclude that the “hazelnut crème” statement suggested that the product contained hazelnuts, even though an inspection of the ingredient list would have confirmed otherwise.  As we’ve pointed out in other posts, courts elsewhere have held that reasonable consumers are expected as a matter of law to read the entire advertisement—including disclaimers and clarifying language—before deciding what it means. See, e.g., In re 100% Grated Parmesan Cheese Mktg. & Sales Prac. Litig., 275 F. Supp. 3d 910, 922 (N.D. Ill. 2017).

The majority also analogized to a “hazelnut cake” product, which, it concluded, a reasonable consumer would expect to contain hazelnuts without looking at the ingredient list for confirmation.  Finally, the majority relied on an apparent “convention in the industry” to state on the front of a package that a product is nut-flavored and does not contain nuts—even though again the ingredient list is clear that the product does not contain nuts and does contain natural and artificial flavors.[1] Accordingly, the panel vacated the decision below and denied the motion to dismiss.

Judge Lynch, writing in dissent, strongly disagreed with the majority’s application of the “reasonable consumer” standard.  Quoting colorful Massachusetts case law, Judge Lynch explained that the standard “depends on the likely reaction of a reasonable consumer rather than an ignoramus” (quoting Aspinall v. Philip Morris Cos., 813 N.E.2d 476, 487 (Mass. 2004)).  And she strongly implied that the plaintiff was more the latter than the former for believing that the product contained hazelnuts.

Most critically, the dissent found that the “100% Arabica Coffee” disclaimer was all but dispositive: “a reasonable consumer plainly could not view the phrase ‘Hazelnut Crème’ as announcing the presence of actual hazelnut in a bag of coffee which also proclaims it is ‘100% Arabica Coffee. . . . It does not say it contains anything other than coffee.’”   Further, the label presented only “accurate information”: it “did not contain any misstatement of its contents, did not feature any pictures or illustrations of hazelnuts, and did not have any error in the ingredient list.”  In addition, the word “hazelnut” on the label modified the word “crème” (which, as the dissent noted, is defined to mean “a sweet liqueur, usually used with the flavor specified”)—a clear indication in the dissent’s view that this statement would be reasonably understood to describe the product’s flavoring rather than constituent ingredients.

Next, the dissent rejected the majority’s cake analogy because “a cake, unlike ‘100% Arabica Coffee,’ is made up of many ingredients”—that is, common sense and experience dictate that while hazelnuts may be one of several ingredients baked into a cake, it is unreasonable to expect a bag of 100% coffee to contain them.[2]   Finally, the “convention in the industry” for labeling flavored coffees was irrelevant—the issue was not whether another labeling choice would have been more precise, but whether “a reasonable consumer would have been misled by the label as it was.”  And here, “[t]he correct and complete ingredient label here would have set Dumont straight, even if she had some initial confusion.” 

This case highlights how different judges weigh whether a particular interpretation of a product label is “reasonable” or “unreasonable” to consumers as a matter of law.  The tendency of some courts to parse a challenged labeling statement in isolation creates substantial uncertainty for manufacturers; it is difficult to predict if any of the myriad interpretations of the statement, particularly when divorced from its context within the totality of the label, could subject companies to costly and protracted discovery.  In our view, a better test is a bright-line rule—already recognized in some courts—that a reasonable consumer views labeling claims in the context of the entire product label, including the ingredient list.  Under that test, it is hard to see even the majority here concluding that a bag of coffee that does not list hazelnuts on the ingredient list—and which claimed only hazelnut crème, not hazelnut, on the front panel—could nonetheless be reasonably construed to promise coffee that’s chock full of (hazel)nuts.

 

[1] Reily has since modified its packaging, which now states on the front that the product is “Artificially Flavored Coffee.”  See https://www.newenglandcoffee.com/product/hazelnut-creme/.

[2] Courts have held that the reasonableness of a plaintiff’s interpretation of a labeling claim is judged in the context of the product at issue, and even on a motion to dismiss “common sense must prevail.”  Danone, US, LLC v. Chobani, LLC, No. 18 cv 11702, 2019 U.S. Dist. LEXIS 14888, at *30 (S.D.N.Y. Jan. 23, 2019).  For example, Reily also sells “Blueberry Cobbler” flavored coffee, and we suspect that even this panel would question the reasonableness of an alleged belief that a bag of coffee contains actual blueberry cobbler.  See https://www.newenglandcoffee.com/product/blueberry-cobbler/.