Mantikas ex rel. Situated v. Kellogg Co.

• Court: U.S. Court of Appeals — Second Circuit
• Writing for the Court: LEVAL, Circuit Judge
• Citation: Mantikas ex rel. Situated v. Kellogg Co., 910 F.3d 633 (2nd Cir. 2018)
• Decision Date: 11 December 2018
• Docket Number: Docket No. 17-2011,August Term, 2017
• Parties: Kristen MANTIKAS, Kristin Burns, and Linda Castle, Individually and on Behalf of all Others Similarly Situated, Plaintiffs-Appellants, v. KELLOGG COMPANY, Defendant-Appellee.

910 F.3d 633

Kristen MANTIKAS, Kristin Burns, and Linda Castle, Individually and on Behalf of all Others Similarly Situated, Plaintiffs-Appellants,

v.KELLOGG COMPANY, Defendant-Appellee.

Docket No. 17-2011

August Term, 2017

United States Court of Appeals, Second Circuit.

Submitted: May 4, 2018

Decided: December 11, 2018

Michael R. Reese, George V. Granade, Reese LLP, New York, N.Y., for Plaintiffs-Appellants.

Kenneth K. Lee, Christina A. Aryafar, Jenner & Block LLP, Los Angeles, CA, Dean N. Panos, Jenner & Block LLP, Chicago, IL, Kelly M. Morrison, Jenner & Block LLP, Washington D.C. for Defendant-Appellee

Before: LEVAL, SACK, and DRONEY, Circuit Judges.

LEVAL, Circuit Judge:

Plaintiffs Kristen Mantikas, Kristin Burns, and Linda Castle ("Plaintiffs") appeal from a judgment entered on August 21, 2017 in the United States District Court for the Eastern District of New York (Sandra J. Feuerstein, J. ), granting Defendant Kellogg Company’s motion to dismiss Plaintiffs’ complaint for failure to state a claim, as provided in Fed. R. Civ. P. 12(b)(6). Plaintiffs are residents of New York and California who purchased Defendant’s Cheez-It crackers that were labeled "whole grain" or "made with whole grain." They filed a class action complaint (the "Complaint") against Defendant alleging that the whole grain labels were false and misleading in violation of New York and California consumer protection laws. They alleged that such labeling would cause a reasonable consumer to believe that the grain in whole grain Cheez-Its was predominantly whole grain, when, in fact, it was not. The primary grain content was enriched white flour. The district court dismissed the Complaint pursuant to Rule 12(b)(6). It held that the whole grain labels would not mislead a reasonable consumer, and that Plaintiffs therefore failed to state a claim.

We conclude that the district court erred in dismissing Plaintiffs’ complaint. Reviewed under the proper standards for a Rule 12(b)(6) motion, the Complaint plausibly alleged that a reasonable consumer would be misled by Defendant’s whole grain labels to believe that the grain in whole grain Cheez-Its was predominantly whole grain. Accordingly, we vacate the judgment of the district court and remand for further proceedings.

BACKGROUND

The Complaint alleges as follows. Defendant produces Cheez-It crackers and sells the brand in a variety of flavors, including "original" and "whole grain." During the relevant time period, Defendant packaged and sold the "whole grain" variety in two boxes, each with slightly different labeling. One version contained the words "WHOLE GRAIN" in large print in the center of the front panel of the box, and " MADE WITH 5G OF WHOLE GRAIN PER SERVING " in small print on the bottom. The other version contained the words " MADE WITH WHOLE GRAIN" in large print in the center of the box, with " MADE WITH 8G OF WHOLE GRAIN PER SERVING " in small print on the bottom. Both versions also contained a "Nutrition Facts" panel on the side of the box, which revealed in much smaller print that a serving size of the snack was 29 grams and that the first ingredient on the ingredients list was "enriched white flour." "Whole wheat flour" was listed on the ingredients list as either the second or third ingredient. As required by federal regulation, the ingredients were listed in order of their predominance, with the primary ingredient listed first. See 21 C.F.R § 101.4 (generally requiring ingredients to be listed "in descending order of predominance by weight").

Plaintiffs purchased one or both versions of the Cheez-Its labeled "WHOLE GRAIN," believing on the basis of that label that the grain content was predominantly whole grain. Contrary to their belief, however, the grain content was not predominantly whole grain, but rather enriched white flour. Plaintiffs assert that they would not have purchased the crackers had they known that the grain content was not predominantly whole grain. Plaintiffs filed the Complaint in the United States District Court for the Eastern District of New York, asserting claims for false advertising and deceptive business practices in violation of New York and California consumer protection laws,¹ as well as for unjust enrichment under Michigan law. They sought declaratory and injunctive relief, as well as monetary damages, on behalf of a putative class of all persons residing in the United States and its territories who purchased whole grain Cheez-Its since May 19, 2010.

Defendant moved to dismiss the Complaint pursuant to Rule 12(b)(6). It argued that the " MADE WITH WHOLE GRAIN" version of the Cheez-Its packaging was not false and misleading, because that statement was factually accurate and, in addition, was qualified by the more detailed " MADE WITH 8G OF WHOLE GRAIN PER SERVING " label. Defendant did not specifically address whether the "WHOLE GRAIN" version of the packaging was false and misleading. Defendant also argued that Plaintiffs’ claims were preempted by federal law, that Plaintiffs failed to state a claim for unjust enrichment under Michigan law, and that Plaintiffs lacked standing to pursue injunctive relief because they failed to allege any likelihood of continuing or future harm.

The district court granted Defendant’s motion. It held, first, that both the " MADE WITH WHOLE GRAIN" and "WHOLE GRAIN" labels would not mislead a reasonable consumer, because both statementswere true and were qualified by further accurate language detailing the number of grams of whole grain per serving. The court dismissed Plaintiffs’ Michigan law unjust enrichment claim for lack of standing, a ruling which Plaintiffs do not appeal. Finally, the court concluded that, because Plaintiffs failed to show that the packaging was misleading, they could not demonstrate injury and therefore lacked standing to pursue injunctive relief. Having dismissed the Complaint on other grounds, the district court expressly did not consider Defendant’s alternative argument that Plaintiffs’ state law claims were preempted by federal law. The district court granted Plaintiffs leave to amend. Plaintiffs instead requested a final judgment, which the court entered on August 21, 2017. Plaintiffs brought this appeal.

DISCUSSION

We review de novo the grant of a motion to dismiss pursuant to Rule 12(b)(6), accepting the factual allegations in the complaint as true and drawing all reasonable inferences in the plaintiffs’ favor. Fink v. Time WarnerCable , 714 F.3d 739, 740-41 (2d Cir. 2013). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (internal quotation marks omitted).

To state a claim for false advertising or deceptive business practices under New York or California law, a plaintiff must plausibly allege that the deceptive conduct was "likely to mislead a reasonable consumer acting reasonably under the circumstances." Fink , 714 F.3d at 741 (citing Freeman v. Time, Inc. , 68 F.3d 285, 289 (9th Cir. 1995) ); Oswego Laborers’ Local 214 Pension Fund v. Marine Midland Bank, N.A. , 85 N.Y.2d 20, 26, 623 N.Y.S.2d 529, 647 N.E.2d 741 (1995). "[I]n determining whether a reasonable consumer would have been misled by a particular advertisement, context is crucial." Id. at 742. We therefore consider the challenged advertisement as a whole, including disclaimers and qualifying language. See Fink , 714 F.3d at 742 ("[U]nder certain circumstances, the presence of a disclaimer or similar clarifying language may defeat a claim of deception."); Freeman , 68 F.3d at 289–90.

The district court held that Plaintiffs failed to state a claim for relief because, in the context of the entire Cheez-Its packaging, a reasonable consumer would not be misled by the whole grain representations. The court relied on the fact that although the Cheez-Its boxes were conspicuously labeled "WHOLE GRAIN" and " MADE WITH WHOLE GRAIN," the boxes accurately displayed, on the front panel, the precise number of grams of whole grain per serving (" MADE WITH 5G [ OR 8G ] OF WHOLE GRAIN PER SERVING "). The court reasoned that because the crackers in fact contained whole grain, and because the front of each box clarified exactly how much whole grain was in the product, a reasonable consumer was not likely to believe that the crackers were made of predominantly whole grain. Mantikas v. Kellogg , No. 16-cv-2552, 2017 WL 2371183, at *4-5 (E.D.N.Y. May 31, 2017). After all, the court emphasized, "a reasonable consumer would not be misled by a product’s packaging that states the exact amount of the ingredient in question." Id. at 4.

Although the district court is correct that an allegedly misleading statement must be viewed "in light of its context on the product label or advertisement as a whole," id. at 3 (quoting Belfiore v. Proctor & Gamble Co. , 311 F.R.D. 29, 53 (E.D.N.Y. 2015) ), the court misapplied that principle to Plaintiffs’ claims in this case. Plaintiffs’ core allegation is that the statements "WHOLE GRAIN" and " MADE WITH WHOLE GRAIN" are misleading because they communicate to the reasonable consumer that the grain in the product is predominantly, if not entirely, whole grain. Contrary to the reasonable expectations communicated by the large, bold-faced claims of "WHOLE GRAIN," however, the grain in the product is predominantly enriched white flour. While the disclosures on the front of the box relied on by the district court (" MADE WITH 5G [ OR 8G ] OF WHOLE GRAIN PER SERVING ") do set forth accurately the amount of whole grain in the crackers per serving, they are nonetheless misleading because they falsely imply that the grain content is entirely or at least predominantly whole grain, whereas in fact, the grain component consisting of enriched white flour substantially exceeds the whole grain portion.

Defendant contends that a reasonable consumer...