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Koenig v. Boulder Brands, Inc.

United States District Court, S.D. New York

January 31, 2014

PHILIP KOENIG and ENRICO LUONGO, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
BOULDER BRANDS, INC. and GFA BRANDS, INC., Defendants

Decided January 29, 2014

Page 275

For Philip Koenig, on behalf of themselves and all others similarly situated, Enrico Luongo, on behalf of themselves and all others similarly situated, Plaintiffs: Douglas Gregory Blankinship, Todd Seth Garber, Meiselman, Packman, Nealon, Scialabba & Baker P.C.(WPl), White Plains, NY; Kim Eleazer Richman, Michael Robert Reese, Reese Richman, LLP, New York, NY.

For Boulder Brands, Inc., GFA Brands, Inc., Defendants: Lyndon Mitchell Tretter, LEAD ATTORNEY, Hogan Lovells U.S. LLP (nyc), New York, NY; Robert B. Wolinsky, Steven P. Hollman, PRO HAC VICE, Hogan Lovells U.S. LLP (DC), Washington, DC.

OPINION

Page 276

OPINION AND ORDER

Edgardo Ramos, U.S.D.J.

This putative class action arises from Plaintiffs' allegations that Boulder Brands, Inc. (" Boulder" ) and GFA Brands, Inc. (" GFA" ) (collectively, the " Defendants" ) deceptively labeled as " fat free" certain milk products that--due to the addition of an omega-3 oil blend--in fact contained one gram of fat per serving. Plaintiffs bring three claims under New York State law: (1) violation of General Business Law (" GBL" ) § 349; (2) breach of express warranty; and (3) unjust enrichment. Complaint (" Compl." ), Doc. 1.

Currently before the Court is Defendants' motion to dismiss the Complaint. Doc. 12. For the reasons set forth below, Defendants' motion is GRANTED in part and DENIED in part.

I. Factual Background

Unless otherwise noted, the following facts are taken from the allegations in the Complaint, which the Court accepts as true for purposes of this motion. Famous Horse Inc. v. 5th Ave. Photo Inc., 624 F.3d 106, 108 (2d Cir. 2010).

a. The Parties

Defendants are Delaware corporations with principal places of business and corporate headquarters in New Jersey. Compl. ¶ ¶ 11-12. Defendant Boulder is a consumer food products company that markets and sells " fat free" milks under

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the Smart Balance trademark in New York. Id. Defendant GFA is a wholly-owned operating subsidiary of Boulder that, likewise, markets and sells Smart Balance " fat free" milks in New York. In addition to milk, the products at issue contain an omega-3 oil blend. Id. ¶ ¶ 1, 39. These products include: (1) Smart Balance " Fat Free Milk and Omega-3s," (2) Smart Balance " Lactose-Free Fat Free Milk and Omega-3s," and (3) Smart Balance " HeartRight® Fat Free Milk and Omega-3s & Natural Plant Sterols" (collectively referenced herein as " Smart Balance" ). Id. ¶ 1 n.1. The Smart Balance milks contain one gram of fat per serving, but the source of the fat is the omega-3 oil blend, not milkfat. Id. ¶ ¶ 50, 59.

Plaintiffs Philip Koenig and Enrico Luongo are New York residents who allegedly purchased Smart Balance starting in 2009. Mr. Koenig allegedly bought Defendants' " Fat Free Milk and Omega-3s," whereas Mr. Luongo purchased Defendants' " Lactose-Free Fat Free Milk and Omega-3s." Id. ¶ ¶ 9, 10. Plaintiffs claim to have paid price premiums for both products. Id. ¶ ¶ 7, 9-10, 81. Plaintiffs seek to represent a class of New York consumers who purchased Smart Balance between 2008 and September 2012 (the " Class Period" ), a period that spans from the time Defendants began marketing Smart Balance to the time Defendants changed Smart Balance labels. Id. ¶ ¶ 1 n.1, 8, 75.[1]

b. The Product Packaging

Plaintiffs primarily base their claims on the content and appearance of the Smart Balance cartons. Compl. ¶ ¶ 49-59; Product labels, Ex. A-C to Mot. Dismiss, Doc. 15.[2] Each carton includes four panels: (1) a front label panel; (2) a nutrition facts side panel; (3) a side panel that states " Smart Balance Milks -- Great taste and good health...together at last!" and that advertises other Smart Balance milk products; and (4) a back panel with a " HEALTH FACTS" text box, which describes each product as " real fat free milk" or " real lactose-free milk" and " important nutrients," then lists, in sub-bullets below, the following attributes: " heart healthy DHA/EPA Omega-3s," 20-25% more calcium and protein than whole milk and " good source of potassium." Product labels, Ex. A-C to Mot. Dismiss. The phrase " tastes rich & creamy like 2% milk" appears under the spout at the tip of each carton. Id. In addition, one side panel of each carton includes the statement: " now you don't have to choose between the full, creamy taste of 2% milk and the health benefits of fat free." Id.

Plaintiffs allege that in total, each Smart Balance carton uses the term " fat free" nine times, and that " [t]hese statements were false, and intentionally confusing and misleading" because the products contained one gram of fat per serving. Compl. ¶ ¶ 57-59. Plaintiffs appear to acknowledge that each carton discloses that the product contains one gram of fat per serving in two places: the front label panel and the nutrition facts panel. Id. ¶ ¶ 50, 59; Product labels, Ex. A-C to Mot. Dismiss.

i. Front Label Panel

The top third of each product's front panel features the yellow Smart Balance

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logo, and is the most prominent part of each front panel. The middle third features the specific name of the product offset by a different background color, and includes the phrase " (1g Fat from Omega-3 Oil Blend)," which appears in small white text underneath the product name. The bottom third depicts a splash of white milk covered by a ribbon of text advertising that the product " Tastes Rich & Creamy Like 2% Milk" and has 20-25% more calcium and protein than whole milk. The phrase " (1g Fat from Omega-3 Oil Blend)" is less prominent than all of the other text on the front panel, which is larger, bolder, or capitalized. Product Labels, Ex. A-C to Mot. Dismiss.

ii. Nutrition Facts Panel

For each of the Smart Balance milks, the nutrition facts panel specifies a serving size of one cup, with a total fat content of one gram per serving, zero grams of saturated fat, and zero grams of trans fat. The total calorie content for one serving is 110 calories, ten of which are from fat. The first three ingredients in each product's ingredient list are: " Grade A Fat Free Milk," " Nonfat Milk Solids," and " Omega-3 Oil Blend (Purified Fish Oil And Sunflower Oil - To Help Maintain Freshness)." The cartons do not include any asterisk or disclaimer modifying the omega-3 oil blend listing on the ingredient list. Product Labels, Ex. A-C to Mot. Dismiss.

c. Website Claims

Plaintiffs also allege that Defendants " misleadingly marketed" Smart Balance as " fat free" on their website. Compl. ¶ ¶ 48-50. Plaintiffs represent that Defendants promoted each of the Smart Balance milks on their website as follows:

o " Smart Balance Fat Free Milk and Omega-3s: The fat free milk that tastes as rich and creamy as 2% and contains EPA/DHA Omega-3s and 25% more calcium and protein than whole milk."
o " Smart Balance HeartRight Fat Free Milk: Try 2 servings a day of our fat free milk with the rich, creamy taste of 2% and naturally sourced ingredients proven to help lower cholesterol as part of a diet low in saturated fat and cholesterol."
o " Smart Balance Lactose-Free Fat Free Milk and Omega-3s: Lactose-free, fat free milk that tastes as rich and creamy as 2%, with 20% more calcium and protein than whole milk and the benefits of Omega-3s."

Compl. ¶ 49.

d. Regulatory Context

i. The FDCA and NLEA

The Federal Food, Drug, and Cosmetic Act (" FDCA" ), passed by Congress in 1938, grants the Food and Drug Administration (" FDA" ) power to ensure " foods are safe, wholesome, sanitary, and properly labeled." 21 U.S.C. § 393(b)(2)(A); Mot. Dismiss at 5 (citing Ackerman v. Coca-Cola Co., No. 09 Civ. 0395 (JG) (RML), 2010 WL 2925955, at *2 (E.D.N.Y. July 21, 2010)).[3] In 1990, Congress amended the FDCA with the Nutrition Labeling and Education Act (" NLEA" ), which sought " to clarify and to strengthen the Food and Drug Administration's legal authority to require nutrition labeling on foods, and to establish the circumstances under which claims may be made about nutrients in foods." N.Y. State Restaurant Ass'n v. New York City Bd. of Health, 556 F.3d 114, 118 (2d Cir. 2009); Pub. L. No. 101-535, 104 Stat. 2353 (1990)

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(codified at 21 U.S.C. § 343, et seq .). These statutes do not provide for a private right of action. See 21 U.S.C.A. § 337 (all proceedings " for the enforcement, or to restrain violations, of this chapter shall be by and in the name of the United States" or, under limited circumstances, brought by a state); Merrell Dow Pharms., Inc. v. Thompson, 478 U.S. 804, 810, 106 S.Ct. 3229, 92 L.Ed.2d 650 (1986).

The FDCA expressly forbids the misbranding of food in interstate commerce. 21 U.S.C. § 331(a)-(c), (k). Section 343 of the FDCA sets forth circumstances under which food is considered " misbranded." 21 U.S.C. § 343. In general, a food is " misbranded" if " any particular" of its labeling is " false or misleading." 21 U.S.C. § 343(a)(1). Section 343(q), titled " [n]utrition information," addresses the information about nutrients in a food that must be disclosed to the public to ensure that a product is properly branded, such as total calories and serving size, which appear on the " nutrition facts" panel on packaged foods. N.Y. State Restaurant Ass'n, 556 F.3d at 118 (citing 21 U.S.C. § 343(q)(1)).

Section 343(r) governs optional information about nutrition, that is, those claims that a food purveyor may choose to make about the nutrient content of its product. Id. at 118-19; 21 U.S.C. § 343(r). A nutrient content claim is a direct expression about the specific concentration of a nutrient in a food, for example, " low sodium" or " contains 100 calories." See 21 C.F.R. § 101.13(b)(1). If a food producer chooses to include a nutrient content claim on a food label, it must comply with the applicable regulations promulgated by the FDA. 21 U.S.C. § 343(r)(1)-(2). Of particular relevance here, the FDA has issued regulations that define the ...


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