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In re Kind LLC "Healthy and All Natural" Litigation

United States District Court, S.D. New York

March 2, 2018


          OPINION & ORDER


         Defendants KIND LLC and KIND Management, Inc. (together, “KIND”) seek dismissal of Plaintiffs' Amended Consolidated Class Action Complaint (the “Amended Complaint”). Plaintiffs allege that KIND deceptively marketed its products as “natural” and “non-GMO” even though they contain synthetic and genetically modified ingredients. This Court previously stayed the “natural” claim. KIND now seeks to dismiss or stay the “non-GMO” claim.

         Separately, Plaintiffs move to lift the stay of the “natural” claim. They assert that the Federal Drug Administration's (“FDA”) rulemaking process to define the term “natural” has stalled since May 2016 when the agency closed its notice and comment period. Plaintiffs are eager to forge ahead on their “natural” claim in tandem with their “non-GMO” claim, and contend that indefinitely staying the “natural” claim will result in undue delay and prejudice.

         For the reasons that follow, KIND's motion to dismiss or stay the “non-GMO” claim is granted in part and denied in part, and Plaintiffs' motion to lift the stay on the “natural” claim is denied without prejudice.


         I. Relevant Procedural History

         A. Motion to Dismiss the Original Complaint

         On September 15, 2016, this Court granted in part KIND's motion to dismiss the original complaint. See In re KIND LLC “Healthy and All Natural” Litig., 209 F.Supp.3d 689 (S.D.N.Y. 2016). As an initial matter, this Court disposed of the original complaint's “healthy” claim after Plaintiffs stipulated to dismissing it. (ECF No. 74.) Invoking the primary jurisdiction doctrine, this Court stayed the “all natural” claim, finding that the FDA's rulemaking process should run its course before allowing that claim to proceed here. Finally, this Court dismissed without prejudice Plaintiff's “non-GMO” claim on the basis that it was insufficiently pled. Despite largely granting KIND's motion, this Court provided Plaintiffs with a further opportunity to re-plead their “non-GMO” claim.

         B. FDA Rulemaking Process

         In November 2015, the FDA “announc[ed] the establishment of a docket to receive information and comments on the use of the term ‘natural' in the labeling of human food products, including foods that are genetically engineered or contain ingredients produced through the use of genetic engineering.” Use of the Term “Natural” in the Labeling of Human Food Products; Request for Information and Comments, 80 Fed. Reg. 69, 905-01, 2015 WL 6958210 (proposed Nov. 15, 2015) (to be codified at 21 C.F.R. pt. 101). The notice and comment period ended in May 2016. Since then, the FDA has gone quiet, leaving various stakeholders with little clarity on the agency's position.

         On December 15, 2016, the parties jointly provided a status report concerning the FDA's rulemaking process. (ECF No. 65.) Despite injecting their letter with competing interpretations of what the FDA might do, the parties acknowledged that the agency had not formally issued any guidance since closing its comment period.

         C. Executive Order Regarding Regulatory Rulemaking

         On February 24, 2017, the parties supplemented their joint status report (see ECF No. 98.), informing this Court of President Trump's January 30, 2017 executive order titled, “Reducing Regulation and Controlling Regulatory Costs” (the “Executive Order”). Exec. Order No. 13771, 82 Fed. Reg. 9339 (Jan. 30, 2017). While the Executive Order does not specifically reference the FDA's rulemaking process, Plaintiffs in particular stressed that an Executive Order rooted in scaling back regulation could stymie the FDA's process of defining “natural.”

         The Executive Order essentially imposes new requirements on agency rulemaking. First, it directs agencies to identify “at least two existing regulations to be repealed” for every new regulation they seek to implement. (Executive Order § 2.) This requirement essentially offsets the cost of a new regulation by eliminating two old ones. Second, the Executive Order establishes an annual budgeting process to control the cumulative costs imposed by each agency's regulations. For 2017, it required the total cost of new regulations to be zero, unless an exception applied. (Executive Order § 2(b).) In 2018, the Executive Order directs each agency to have a budget that accounts for the reduction of costs imposed by their own regulations. (Executive Order § 3.)

         II. Allegations of the Amended Complaint

         In their Amended Complaint, Plaintiffs re-allege the stayed “natural” claim and seek to cure the deficiencies previously identified in this Court's Opinion and Order underlying their “non-GMO” claim. The Amended Complaint devotes a section to addressing KIND's non-GMO marketing, alleging, among other things, that “[t]esting completed on June 1, 2016 detected the presence of GMOs in at least some of [KIND's] Products . . .” and that at least one product tested “positive [for] GMO soy from the ingredient soy protein isolate.” (Amended Consolidated Class Action Complaint, ECF No. 84 (“Compl.”), ¶ 33.)

         In total, Plaintiffs assert nine different claims on behalf of a putative nationwide class and/or various state sub-classes: (1) breach of express warranty; (2) unjust enrichment or common law restitution; (3) negligent misrepresentation; (4) violation of New York General Business Law (“NY GBL”) § 349; (5) violation of NY GBL § 350; (6) violation of California's Consumers Legal Remedies Act (“CLRA”; (7) violation of California's False Advertising Law (“FAL”); (8) violation of California's Unfair Competition Act (“UCL”); and (9) violation of Florida's Deceptive and Unfair Trade Practices Act (“FDUPTA”).


         I. Standard

         The allegations in the Amended Complaint are presumed true, with all reasonable inferences drawn in Plaintiffs' favor, for purposes of KIND's motion to dismiss. Rescuecom Corp. v. Google Inc., 562 F.3d 123, 127 (2d Cir. 2009). To survive a motion to dismiss, “a complaint must contain sufficient factual matter . . . to state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 663, 678 (2009) (citation omitted); Ruston v. Town Bd. for Town of Skaneateles, 610 F.3d 55, 59 (2d Cir. 2010). However, a claim must rest on “factual allegations sufficient to raise a right to relief above the speculative level.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A pleading that offers “labels and conclusions” or a “formulaic recitation of the elements of a cause of action” fails to state a claim. Iqbal, 556 U.S. at 678 (citation omitted).

         II. Non-GMO Claim

         Plaintiffs allege that KIND's “non-GMO” representations are false because KIND's products contain ingredients derived from genetically modified crops. According to Plaintiffs, a genetically modified crop is a crop whose genetic material has been altered by humans using genetic engineering techniques. (Compl. ¶ 2.) Moreover, “genetically modified organisms” are “organisms in which the genetic material (DNA) ...

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