Committee On Children's Television, Inc. v. General Foods Corp.

• Decision Date: 22 December 1983
• Court: California Supreme Court
• Parties: , 673 P.2d 660 COMMITTEE ON CHILDREN'S TELEVISION, INC., et al. Plaintiffs and Appellants, v. GENERAL FOODS CORPORATION et al., Defendants and Respondents. L.A. 31603.

Page 783

197 Cal.Rptr. 783

35 Cal.3d 197, 673 P.2d 660

COMMITTEE ON CHILDREN'S TELEVISION, INC., et al. Plaintiffs and Appellants, v. GENERAL FOODS CORPORATION et al., Defendants and Respondents.

L.A. 31603.

Supreme Court of California In Bank.

Dec. 22, 1983.

Sidney M. Wolinsky, Lois Salisbury and Robert L. Gnaizda, San Francisco, for plaintiffs and appellants.

Honora Kaplan, Norah M. Wylie and Gitlin, Emmer, Kaplan & Bohn, Boston, Mass., as amici curiae on behalf of plaintiffs and appellants.

Gibson, Dunn & Crutcher, John J. Hanson, J. Edd Stepp, Jr., Steven C. McCracken and Gail E. Lees, Los Angeles, for defendants and respondents.

BROUSSARD, Justice.

Plaintiffs appeal from a judgment of dismissal following a trial court order sustaining demurrers without leave to amend to their fourth amended complaint. The complaint essentially charges defendants--General Foods Corporation, Safeway Stores, and two advertising agencies--with fraudulent, misleading and deceptive advertising in the marketing of sugared breakfast cereals. The trial court found its allegations insufficient because they fail to state with specificity the advertisements containing the alleged misrepresentations. We review the allegations of the complaint and conclude that the trial court erred in sustaining demurrers without leave to amend to plaintiffs' causes of action charging fraud and violation of laws against unfair competition and deceptive advertising.

I. SUMMARY OF THE PLEADINGS AND PROCEDURE.

Plaintiffs filed their original complaint on June 30, 1977, as a class action on behalf of "California residents who have been misled or deceived, or are threatened with the likelihood of being deceived or misled," by defendants in connection with the marketing of sugared cereals. ¹ The named plaintiffs included five organizations (The Committee on Children's Television, Inc; the California Society of Dentistry for Children; the American G.I. Forum of California; the Mexican-American Political Association; the League of United Latin American Citizens), individual adults, and individual children.

The principal defendant is General Foods Corporation, the manufacturer of five "sugared cereals"--Alpha Bits, Honeycomb, Fruity Pebbles, Sugar Crisp, and Cocoa Pebbles--which contain from 38 to 50 percent sugar by weight. The other corporate defendants are two advertising agencies--Benton and Bowles, Inc., and Ogilvy & Mather International, Inc.--which handled advertising of these cereals, and Safeway Stores, which sold the products to plaintiffs. Finally, the complaint includes as defendants numerous officers and employees of the corporate defendants.

When the court sustained a demurrer to the third amended complaint, it ruled that no cause of action could be stated on behalf of the organizational plaintiffs. The individual plaintiffs remaining then filed their fourth amended complaint; the validity of this complaint is the principal issue on appeal.

The fourth amended complaint presents seven causes of action: two based upon consumer protection statutes, ² four sounding in fraud, and one for breach of warranty. The first cause of action is based on Business and Professions Code sections 17200-17208, the unfair competition law. Paragraph 34 alleges that defendants "engaged in a sophisticated advertising and marketing program which is designed to capitalize on the unique susceptibilities of children and preschoolers in order to induce them to consume products which, although promoted and labelled as 'cereals,' are in fact more accurately described as sugar products, or candies." The complaint thereafter refers to sugared cereals as "candy breakfasts."

Paragraph 35 lists some 19 representations allegedly made in television commercials aimed at children. Most of these representations are not explicit but, according to plaintiffs, implicit in the advertising. They include, for example, the implied representation that "children ... who regularly eat candy breakfasts are bigger, stronger, more energetic, happier, more invulnerable, and braver ...," that eating such products is a " 'fun' thing ... to do," that the products possess or impart "magical powers," etc. Some representations, however, are more specific: that the sugared cereals are "grain products," are "healthful and nutritious," contain adequate amounts of elements essential to diet, and "are the most important part of a well balanced breakfast." ³ Plaintiffs allege that commercials containing these representations are broadcast daily. Although the commercials changed every 60 days, "they retain consistent themes and each convey ... the representations as set forth." Defendants, but not plaintiffs, know the exact times, dates, and places of broadcasts. Plaintiffs further allege that the same representations appear in other media, and on the cereal packages themselves.

Paragraph 42 asserts that defendants concealed material facts, such as the sugar content of their products, that "[t]here is no honey in Honeycomb, no fruit in Fruity Pebbles," that sugared cereals contribute to tooth decay and can have more serious medical consequences, and that they cost more per serving than breakfast foods of greater nutritional value. ⁴ Such concealment, plaintiffs allege, when joined with the affirmative misrepresentations listed in paragraph 35, render the advertisements misleading and deceptive.

The complaint asserts at length the special susceptibility of children to defendants' "advertising scheme," and explains how defendants take advantage of this vulnerability. It further asserts that, as defendants know, the desires and beliefs of children influence and often determine the decision of adults to buy certain breakfast foods. Finally, claiming that defendants will continue deceptive practices unless enjoined, the first cause of action seeks injunctive relief, plus restitution of monies paid by plaintiff class for "candy breakfasts."

Plaintiffs' second cause of action is based on Business and Professions Code section 17500-17572, which prohibits false or misleading advertising. Since false or misleading advertising is a form of unfair competition (Bus. & Prof.Code, § 17200), plaintiffs' second cause of action incorporates by reference the paragraphs charging unfair competition in the first cause of action.

The third through sixth causes of action set out various aspects of the tort of fraud. The third cause of action charges deliberate fraud in violation of Civil Code section 1710, subdivision 1. Incorporating the allegations of the first cause of action, it adds allegations of plaintiffs' reasonable reliance upon defendants' representations, especially in light of defendants' claim to superior knowledge about the nutritional value of foods. The fourth cause of action adds allegations of negligent misrepresentation (Civ.Code, § 1710, subd. 2); the fifth cause of action adds fraudulent concealment (Civ.Code, § 1710, subd. 3). The sixth cause of action is based on common law fraud. Each of these causes of action asserts proximate causation, and claims compensatory damages of $10 million; those counts asserting intentional misrepresentation include a prayer for punitive damages. ⁵

The prayer for relief is extensive, and includes some novel requests. In addition to seeking damages, restitution, and injunctive relief, plaintiffs seek warning labels in stores and on packages, creation of funds for research on the health effects of sugar consumption by young children, public interest representatives on defendants' boards of directors, and public access to defendants' research on the health effects of their products. ⁶

Defendants demurred to the fourth amended complaint for failure to state a cause of action and for uncertainty. ⁷ The trial court sustained the demurrers without leave to amend. The trial judge explained the basis for his ruling: "[I]n order to state a cause of action for fraud or for breach of warranty, there must be alleged with specificity the basis for the cause and that is, if there are advertisements which contain fraudulent matters, those advertisements must be set out. [p] In paragraph 35, which is the heart of the allegations concerning the conveying of the representations, we have just a series of very general allegations to which there is no reference of an advertisement actually made.... [p] Paragraph 38 which makes the allegations concerning media dissemination sets out no television stations, no other media, except for the fact that these ads were run on television stations every day in Southern California for a four-year period. [p] This gives the defendant practically no kind of information concerning that which the defendant must answer, and it doesn't give the court a sufficient factual basis for its administration of the case."

Appealing from the judgment of dismissal, plaintiffs contend that their fourth amended complaint states, or can be amended to state, a valid cause of action. They also ask us to review certain rulings by the trial court respecting earlier versions of their complaint. They point out that in sustaining a demurrer to their second amended complaint, the court denied leave to amend as to causes of action asserting breach of fiduciary duty and violation of the Sherman Food, Drug and Cosmetic Law (Health & Saf.Code, § 26000 et seq.). In addition, when considering plaintiffs' third cause of action, the court ruled without leave to amend that the organizational plaintiffs had no cause of action, and that none of the plaintiffs could seek damages for violations of the unfair competition or false advertising laws. Although ordinarily an appellate court will not consider the allegations of a superseded complaint (see Foreman & Clark Corp. v. Fallon (1971) 3 Cal.3d 875, 884, 92 Cal.Rptr. 162, 479 P.2d 362), that rule does not apply when the trial court denied plaintiffs leave to include those allegations in an amended complaint.

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