Lee v. Conagra Brands, Inc.

• Decision Date: 06 May 2020
• Docket Number: No. 17-2131,17-2131
• Citation: 958 F.3d 70
• Parties: Margaret LEE, on behalf of herself and all others similarly situated, Plaintiff, Appellant, v. CONAGRA BRANDS, INC., Defendant, Appellee, Roche Bros. Inc.; Roche Bros. Supermarkets, Inc.; Roche Bros. Supermarkets, LLC; Stop & Shop Supermarket Company LLC, Defendants.
• Court: U.S. Court of Appeals — First Circuit

958 F.3d 70

Margaret LEE, on behalf of herself and all others similarly situated, Plaintiff, Appellant,

v.CONAGRA BRANDS, INC., Defendant, Appellee,Roche Bros. Inc.; Roche Bros. Supermarkets, Inc.; Roche Bros. Supermarkets, LLC; Stop & Shop Supermarket Company LLC, Defendants.

No. 17-2131

United States Court of Appeals, First Circuit.

Filed May 6, 2020

Patrick J. Vallely, with whom Edward F. Haber and Shapiro Haber & Urmy LLP, Boston, were on brief, for appellant.

Angela M. Spivey, with whom R. Trent Taylor and McGuire Woods LLP were on brief, for appellee.

Before Howard, Chief Judge, Kayatta, Circuit Judge, and Torresen,^* U.S. District Judge.

HOWARD, Chief Judge.

Margaret Lee purchased Wesson brand vegetable oil ("Wesson Oil") from grocery stores in Brookline and Mashpee, Massachusetts. The Wesson Oil label advertised that it was "100% Natural." After learning that Wesson Oil contained genetically modified organisms ("GMOs"), which Lee regarded as quite unnatural, she sued the manufacturer and distributer, Conagra Brands, Inc. ("Conagra"), in Massachusetts Superior Court. She sued on her own behalf and on behalf of others similarly situated. Lee alleged that, by labeling Wesson Oil "100% Natural," Conagra violated Massachusetts's prohibition against unfair or deceptive trade practices. See Mass. Gen. Laws ch. 93A ("Chapter 93A").¹ Conagra removed the action to federal court, and the district court dismissed Lee's complaint for failure to state a claim. The district court determined that Wesson Oil's label was neither unfair nor deceptive as a matter of law because it conformed to the Food and Drug Administration's ("FDA") labeling policy. We reverse.

I.

We review de novo an order dismissing a complaint for failure to state a claim, and we reverse the dismissal if "the combined allegations, taken as true ... state a plausible, not a merely conceivable, case for relief." Sepúlveda-Villarini v. Dep't of Educ. of P.R., 628 F.3d 25, 29 (1st Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678-79, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) ; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). "In undertaking this review, ‘we accept as true all well-pleaded facts alleged in the complaint and draw all reasonable inferences therefrom in the pleader's favor.’ " Lanza v. Fin. Indus. Regulatory Auth., 953 F.3d 159, 162 (1st Cir. 2020) (quoting Nystedt v. Nigro, 700 F.3d 25, 30 (1st Cir. 2012) ). To the extent that Lee's Chapter 93A complaint sounds in fraud, it must meet Federal Rule of Civil Procedure 9(b)'s heightened pleading requirements. See Shaulis v. Nordstrom, Inc., 865 F.3d 1, 13 n.6 (1st Cir. 2017). "The circumstances to be stated with particularity under Rule 9(b) generally consist of the who, what, where, and when of the allegedly misleading representation." Kaufman v. CVS Caremark Corp., 836 F.3d 88, 91 (1st Cir. 2016) (alteration and quotation marks omitted).

Although Conagra moved to dismiss the complaint on four grounds, the district court only addressed one; it agreed with Conagra that Wesson Oil's label was not unfair or deceptive as a matter of law because the label "conforms to FDA labeling policy." That policy essentially permits labeling a product as "natural" so long as it includes no added synthetic ingredients, like artificial colors or flavors. The district court also noted that the FDA does not require the affirmative disclosure of GMOs' presence. Conagra raises three other arguments that the district court did not discuss. It submits: (1) that Lee fails to allege a cognizable Chapter 93A injury; (2) that the FDA affirmatively permits the "100% Natural" representation on Wesson Oil's label; and (3) that federal statutes -- namely, the Nutrition Labeling and Education Act, 21 U.S.C. § 343-1, and the National Bioengineered Food Disclosure Standard, 7 U.S.C. § 1639 et seq. -- preempt Lee's requested relief.

II.

We begin, as ever, with subject matter jurisdiction. Conagra removed the case and justifies federal jurisdiction under the Class Action Fairness Act ("CAFA"), 28 U.S.C. § 1332(d). CAFA requires minimal diversity and that at least $5,000,000 be in controversy. 28 U.S.C. § 1332(d)(2). Diversity is met because Lee is a resident of Massachusetts and Conagra is a Delaware corporation with its headquarters in Illinois. See id. § 1332(d)(2)(A). Conagra is the removing party, so it "bears the burden to show with a ‘reasonable probability’ that the amount in controversy requirement is satisfied." Cooper v. Charter Commc'ns Entm'ts I, LLC, 760 F.3d 103, 106 (1st Cir. 2014). Lee does not contest jurisdiction, and we are at ease finding federal jurisdiction proper based upon the allegations in Lee's amended complaint and Conagra's unchallenged representations. See Liu v. Amerco, 677 F.3d 489, 493 (1st Cir. 2012).

Briefly, the complaint defines the class as "[a]ll persons who have purchased Wesson Oil products in Massachusetts that were labeled ‘100% Natural,’ " and it is not limited to a specific period. The complaint seeks damages comprising "up to three times the damages that [Lee] and the Class incurred, or at the very least the statutory minimum award of $25 per purchase of a Wesson Oil product ... together with all related court costs, attorneys' fees, and interest." In its Notice of Removal, Conagra noted that these Chapter 93A damages could potentially be trebled, and that, due to the large number of Wesson Oil purchases potentially at stake, the claims "yield an amount in controversy over and above the CAFA jurisdictional limit." Conagra has met its burden to show with a "reasonable probability" that $5 million is at stake. See id. ("It is not clear to a legal certainty that the amount in controversy is less than $5 million. So we proceed to the merits." (citation omitted)).

III.

We turn to the district court's rationale for dismissing Lee's complaint. The district court analyzed whether Wesson Oil's label was "unfair" within the meaning of Chapter 93A, but it did not cite or discuss the standard for whether the label was "deceptive." Chapter 93A bars "unfair or deceptive acts or practices." Mass. Gen. Laws ch. 93A, § 2(a) (emphasis added). The proscription is disjunctive, so the district court should have separately addressed whether the complaint alleged sufficiently that Wesson Oil's label was deceptive. See 35 Mass. Prac. Consumer Law § 4:16 (3d ed. 2017) (observing that an act or practice violates Chapter 93A if it is "either unfair or deceptive" (citing Commonwealth v. DeCotis, 366 Mass. 234, 316 N.E.2d 748 (1974) ; Mass. Farm Bureau Fed'n, Inc. v. Blue Cross of Mass., Inc., 403 Mass. 722, 532 N.E.2d 660, 664 (1989) ; Cherick Distribs., Inc. v. Polar Corp., 41 Mass.App.Ct. 125, 669 N.E.2d 218, 221 (1996) )). For the reasons that follow, we conclude that Lee's complaint plausibly alleges that Wesson Oil's label violated Chapter 93A's prohibition against deceptive acts or practices.²

When deciding whether conduct is deceptive under Chapter 93A, Massachusetts courts are "guided by interpretations of ["deceptive"] as found in the analogous Federal Trade Commission Act ... 15 U.S.C. § 45(a)(1)." Aspinall v. Philip Morris Cos., 442 Mass. 381, 813 N.E.2d 476, 487 (2004) ; see also Mass. Gen. Laws ch. 93A, § 2(b). Those interpretations instruct that a food product label generally qualifies as deceptive in violation of Chapter 93A "when it has the capacity to mislead consumers, acting reasonably under the circumstances, to act differently from the way they otherwise would have acted (i.e., to entice a reasonable consumer to purchase the product)." Aspinall, 813 N.E.2d at 487-88 (citing Matter of Cliffdale Assocs., Inc., 103 F.T.C. 110, 165 (1984) ).

The complaint alleges that the "100% Natural" representation on the Wesson Oil label enticed Lee to buy the product because it indicated to her that the oil was GMO-free. "So, the question under Massachusetts law is whether the label had the capacity to mislead consumers, acting reasonably under the circumstances, to believe that [Wesson Oil] contained [no GMOs]." Dumont v. Reily Foods Co., 934 F.3d 35, 40 (1st Cir. 2019).

Pursuant to an agreement between the agencies, the FTC defers to the FDA's determinations as to whether food product labeling is deceptive. See Bristol-Myers Co. v. F.T.C., 738 F.2d 554, 559 (2d Cir. 1984) (citing 36 Fed. Reg. 18,539 (Sept. 16, 1971) ). Accordingly, the FDA's guidance will inform our analysis as to whether these allegations survive dismissal. See Dumont, 934 F.3d at 41 ("[W]e see no unfair cost in recognizing a state-law claim that ... can only be lodged against manufacturers that fail to adhere to the rules and safe harbors that have been created by the FDA and that help form consumers' expectations in reading labels.").

At this stage, our analysis begins and ends with the allegations in the complaint. Lee claims that Wesson Oil's label could have misled a reasonable consumer into buying the product under the (false) impression that it contained no GMOs. The complaint asserts, for instance, that consumers consider whether products are "natural" when they make their purchasing decisions, and that they are willing to pay more for natural items. Lee further alleges that surveys show that many scientists and consumers do not consider GMO-containing products to be natural. She submits that Conagra indicated that Wesson Oil was "100% Natural" on its label even though it contained GMOs, that Lee herself understood "100% Natural" to mean that Wesson Oil was GMO-free, that she purchased it from specific grocery stores in Massachusetts "five or six times per year" for years, and that she bought a different product after she learned that Wesson Oil contained GMOs. The complaint thus plausibly alleges that Wesson Oil's label could have deceived a reasonable consumer.

Federal courts have permitted very similar complaints to go forward under other states' unfair or deceptive trade practices statutes...