When I think of some of the iconic products from my childhood, there was the VCR, Pop Rocks candy, and that green tube of Parmesan cheese. Well, after all of these years, the VCR is gone, Pop Rocks were discontinued (though not because of the unfounded rumors that they cause children to explode) and then relaunched, and litigation rages on about what is actually in that green tube.
Several lawsuits were filed around the country alleging that Kraft Heinz, the ICCO-Cheese Company, Target, Wal-Mart, SuperValu, Albertson's and Publix all misled consumers in their marketing of that green tube of Parmesan cheese. They plaintiffs alleged that the claim, "100% grated Parmesan cheese" was false and misleading because that green tube has more than just Parmesan cheese in the package; it also contains between four and nine percent of added cellulose powder and potassium sorbate. (Apparently, these additives prevent the cheese from caking and act as a preservative.)
These lawsuits were ultimately consolidated in the Northern District of Illinois, which dismissed the case for failure to state a claim, finding, essentially, that since the "100%" claim is ambiguous, consumers can read the ingredient statement to find out what is actually in the product. (In other words, if you're confused about whether the product is 100% grated, 100% Parmesan, or 100% cheese, you can check the back of product to help clear things up.) The District Court also found that "common sense" would lead a reasonable consumer to believe that the product must contain added ingredients, since the cheese is sold unrefrigerated in the grocery aisle, alongside dried pastas and canned sauces.
The plaintiffs appealed and the Seventh Circuit reversed and remanded, holding that the plaintiffs had sufficiently alleged that the prominent "100% grated Parmesan cheese" labeling was deceptive. Here's why.
By way of background, the plaintiffs sued under the laws of fourteen state statutes which all prohibit deceptive advertising. These statutes all required the plaintiffs to show that the product's labeling was likely to deceive a reasonable consumer, which "requires a probability that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled."
The Seventh Circuit first addressed the question of whether, as a matter of law, an ambiguous claim on the front of a package is cured by an ingredient statement on the back. The court held that it was not. The court wrote, "an accurate fine-print list of ingredients does not foreclose as a matter of law a claim that an ambiguous front label deceives reasonable consumers. Many reasonable consumers do not instinctively parse every front label or read every back label before placing groceries in their carts." The court felt that adopting an ambiguity rule used by the District Court -- and, incidentally, by many others, as readers of this blog are well aware -- would actually encourage deceptive advertising and labeling. The court explained that, "a rule that immunized any ambiguous label so long as it is susceptible to one non-deceptive interpretation would validate highly deceptive advertising."
The court also emphasized that its approach -- which doesn't give labeling a free pass on ambiguous statements -- holds packaging to a standard that is more consistent with standards applied to other types of advertising. For example, under the FTC Act, "It is well established, and critical to the notion of preventing false advertising, that where an advertisement conveys more than one meaning, one of which is false, the advertiser is liable for the misleading variation."
The Seventh Circuit then addressed the District Court's holding that "common sense" also rendered the plaintiff's understanding of the labeling to be unreasonable -- since common sense tells us that cheese needs to be refrigerated. It turns out that the "common sense" that the district court was relying on was, in fact, incorrect. Noting that many cheeses do not need to be refrigerated, the court wrote that, "For millennia, people have been making cheese to preserve milk for later consumption, all without modern refrigeration." (More information about this is available on the USDA's website, here.) The court also explained that, since grocery customers often see pure grated Parmesan cheese being displayed, unrefrigerated, next to the cheese wheels that they are grated from, "common sense is not a substitute here for evidence, and certainly not as a matter of law."
Finally, the court held that the plaintiffs' claims were not preempted by federal law, explaining that although the FDA does permit "grated cheese" to have added ingredients, federal law does not define the meaning of "100%" grated cheese.
Over the last several years, many marketers have succeeded in arguing that the ambiguous claims on the front of their packaging are cured by accurate information on the back. If the Seventh Circuit's reasoning here is more widely adopted, these types of lawsuits may start to look a lot different. If you're hoping that your product labeling is going to pass muster because of clarifying information on the back of the package, it may be time to add "changes to your packaging" to your list of new year's resolutions.
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