Unreasonable Second Circuit Decision Sets Daunting Precedent for Packaged-Food Makers

cheez itA decision this month from the U.S. Court of Appeals for the Second Circuit reunites us with an old friend, The Reasonable Consumer. As we’ve discussed in previous posts here and in Washington Legal Foundation publications, The Reasonable Consumer has figured prominently in consumer class-action lawsuits that allege harm from supposedly deceptive or misleading food labels. That’s because the question at issue in the Second Circuit case, Mantikas v. Kellogg Company, is a common one in Food Court litigation: would a reasonable consumer interpret the relevant information on the food package the same way the plaintiff claims to have read it, and be similarly misled?

In their lawsuit, Ms. Mantikas and two other consumers claim that certain statements on packages of Cheez-It Crackers violate New York and California laws by misleading the plaintiffs into thinking Kellogg baked the crackers with 100%, or nearly 100%, whole grain. Some boxes stated in large, bold type “Whole Grain,” while others said “Made with Whole Grain.” The plaintiffs argued that both of those statements would dupe a reasonable consumer—which the Ninth Circuit has defined as representing a “significant portion of the consuming public … acting reasonably in the circumstances”—into buying Cheez-It Crackers.

If a reasonable consumer would base its buying decision on just one of those statements alone, it’s plausible, if not entirely reasonable, for him or her to think that the Cheez-It Crackers contained entirely or mostly whole grain. Kellogg argued in the district court that the reasonable-consumer analysis should take more than just one isolated label statement into consideration. In its ruling on Kellogg’s motion to dismiss, the Eastern District of New York agreed, explaining that the broader context in which Kellogg made the statement—the product package as a whole— must be considered.

Other relevant information on the Cheez-It boxes in question, according to the trial court, included the front-of-package qualifying statement “Made with 5g of whole grain per serving” and the Nutrition Facts panel that listed the serving size as 26 grams and also disclosed the ingredients, with the first being “enriched wheat flour.” The district court concluded that when placing the alleged deceptive statements into larger context, a reasonable consumer would not be misled. The plaintiffs declined the court’s invitation to amend their complaint, and instead asked that final judgement be issued in Kellogg’s favor so an appeal could proceed.

In its December 11 decision, the Second Circuit panel applied the much narrower reasonable-consumer standard advocated by Mantikas and reversed the district court. Though the panel agreed that the product label as a whole should be considered when undertaking the reasonable-consumer analysis, it disagreed that defendants can point to the data in the Nutrition Facts as relevant information. The court also concluded that the “Made with 5g of whole grain per serving” compounded the misleading nature of “Whole Grain” and “Made with Whole Grain.”

On the irrelevance of the Nutrition Facts, the Second Circuit cited a Ninth Circuit decision, Williams v. Gerber Products, for the proposition that “reasonable consumers should [not] be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredients list.” The court thus essentially concluded that one truthful statement of fact, standing alone, could mislead a reasonable consumer in violation of two states’ consumer-protection laws.

The court’s application of Williams, however, is flawed. Plaintiffs and courts routinely cite Williams when concluding that the Nutrition Facts are not a defense to an allegedly misleading label. But as Kellogg’s appellate brief explained, Williams involved a defendant’s affirmative misrepresentation—images of fruits that the product didn’t contain—and the defendant’s argument that the absence of those fruits could be confirmed by looking at the ingredient list. “Whole Grain” and “Made with Whole Grain” are truthful statements, and are clarified by another truthful statement, “Made with 5g of whole grain per serving.” When posed with those facts, it is objectively reasonable to conclude that a consumer would consequently examine the Nutrition Fact for the amount of grams in one serving size, and perhaps also peer at the ingredient list.

One relatively recent, highly relevant decision the Mantikas court didn’t bother to mention is In re: 100% Grated Parmesan Cheese Marketing and Sales Practices Litigation. There, a multidistrict litigation judge evaluated the consumer-protection laws of multiple states, including New York and California, when appraising the plaintiffs’ claim that the presence of cellulose in Parmesan cheese rendered the front-of-package statement “100% Grated Parmesan Cheese” deceptive. The court held that a reasonable consumer would review the label as a whole, including the Nutrition Facts, and understand that the added cellulose did nothing to detract from the 100%-cheese nature of the product.

Decisions like Mantikas that cast aside the Nutrition Facts when determining how a reasonable consumer contemplates packaged foods are decidedly behind the times. As recent study published in the American Journal of Preventative Medicine concludes, information on food labels, including the Nutrition Facts, have played an increasingly significant role in reducing consumers’ calories and increasing consumption of productive nutrients. And if reasonable consumers don’t factor the Nutrition Facts into purchasing and consumption decisions, why would the Food and Drug Administration have spent millions of dollars to redesign that ubiquitous label, a change that food companies are spending hundreds of millions to implement?

Class-action plaintiffs’ lawyers must be delighted with the Second Circuit’s decision, as no doubt are their allies at nanny-state activist groups like Center for Science in the Public Interest, whose lawyers worked on Mantikas. One can imagine, however, that trial judges within the circuit probably won’t be thrilled with the uptick in food-labeling lawsuits on their dockets post-Mantikas.

The decision also puts packaged-food companies in quite a predicament. Kellogg’s appellate brief warned that the court’s embrace of Mantikas’ reasonable-consumer standard would “effectively bar a company from making a truthful statement about a specific ingredient or nutrient if that product also contains other ingredients because some consumer may subjectively misconstrue that true statement.” Granted, whole grain only made up 20% of the Cheez-It ingredients, but if it’s healthier for consumers to consume some whole grain when they snack than no whole grain, it seems entirely unreasonable to chill the willingness of Kellogg and others to make that information clear on the package.

We feel especially bad for The Reasonable Consumer, whom judges within the Second Circuit are now required to look upon as myopic, naive, and in need of government-mandated assistance. But we feel worse about what Mantikas tells us about the state of our legal system. As the Wall Street Journal editorialized about Mantikas on December 18, “When people sometimes ask if the American legal system has lost its mind, this is what they’re referring to.”

Indeed.

Also published by Forbes.com on WLF’s contributor page.

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