Commercial litigator Brooks Gresham and products liability litigator Trent Taylor bring us some timely thoughts about reliance from a recent decision by the U.S. District Court for the Northern District of California in a food-labeling class action.
Leonardo da Vinci, among many other laudable epithets, has been called “the last person who knew everything,” as he is thought to have learned all of the scientific knowledge that was available at the time. Whether or not true, undoubtedly Leonardo would be overwhelmed by the amount of knowledge available today, instantaneously, at the touch of a button. Indeed, in the United States alone, merely knowing the body of state and federal laws, rules, regulations, and case holdings is impossible for the most encyclopedic lawyer among us. Nonetheless, ignorance of the law remains no defense to its application, and each of us is deemed to know every legislative code, regulatory mandate, and published judicial decision applicable to our personal and professional conduct.
As a practical matter, such constructive knowledge is an increasingly preposterous fiction. But, as the expression of a consistent legal principle, few would disagree that it is appropriate to require an actor to know the legal consequences of her action before the action is taken. A similar principle has been embodied for centuries in the doctrine of caveat emptor, by which a buyer is charged with knowledge of the reasonably observable or discoverable characteristics of the thing to be purchased, and must decide for herself whether it is fit for her purposes.
Modern legislatures (and courts) have softened the sometimes harsh rule of caveat emptor. But we now live in an age of unprecedented access to information, true and false, biased and neutral, sound and unsound, as well as unprecedented availability of product choices. Consumers today make purchase decisions based not only on affixed packaging claims, but on the tremendous body of website representations, independent reviews, Wikipedia entries, blog notes, Yelp comments, and other forms of information now instantly available to every person with a smartphone or a library pass. A consumer today can find an encyclopedia of information about virtually any product in real time, while standing in a grocery aisle holding a product. Based on that information, a consumer can instantly educate herself about a product and its claims, can put the product down and select another, and, increasingly, can purchase the product and return it later for a full refund either through the retailer or the manufacturer. At the same time, courts are being choked with increasing case dockets amid decreased funding, and consumer class actions constitute a significant portion of the caseload. Is it time to reconsider the duty of the consumer to investigate the reasonably discoverable attributes of a product?
Consider the recent District Court decision in the case of Swearingen v. Healthy Beverage, LLC, Case No. 13-cv-04385-EMC, 2017 U.S. Dist. LEXIS 66938 (N.D. Cal. May 2, 2017). In Swearingen, the plaintiffs are two “health-conscious consumers who wish to avoid ‘added sugars’ in the products they purchase.” The plaintiffs purchased a packaged tea product that used the term “evaporated cane juice” on the label. Evaporated cane juice is sugar, as a Google search of the term readily discloses. Indeed, there are numerous widely disseminated articles and discussions touting the benefits of raw sugar cane as a natural food sweetener. Nonetheless, in Swearingen, the plaintiffs “scanned the [product label] ingredient lists . . . for sugar[,] failed to recognize ‘evaporated cane juice’” as such, and purchased the product. In addition, the plaintiffs conceded that they “may have looked at” the company’s website, but “‘did not focus’ on it.” According to the District Court, had the plaintiffs focused on the website, they would have read a statement thereon that “cane juice is natural sugar.” Nonetheless, in alleged ignorance, the plaintiffs purchased a product that they contend they “would not have bought . . . had they known” that it contained “added sugar.”
The Swearingen Court (in the Northern District of California, which has been so inundated with food-labeling class actions that it has been called the “Food Court”), had no trouble disposing of the plaintiffs’ assertion that they reasonably relied on the product’s label description to mean that there was no added sugar in the tea. Indeed, the Court did so on a motion to dismiss, based in part on a pleading decision by the plaintiffs’ counsel and in part on counsel’s candor at the hearing in admitting that the plaintiffs had seen the company’s website. The pertinent pleading decision was to allege that the company’s website was “incorporated into the label” for the product. The pertinent admission was that the plaintiffs actually saw the website disclosing that “cane juice is natural sugar.” Based on that record, the Court cited cases holding that actual and reasonable reliance remains a necessary element of misrepresentation-based claims under the California Unfair Competition Law, and concluded that the plaintiffs could not “plausibly claim to have relied” on the company’s alleged misrepresentations. The Court further found that no pleading amendment could be made that would relieve the plaintiffs from the aforementioned admissions, and so granted the defendant’s motion to dismiss with prejudice.
The end result of the Swearingen decision is that the product manufacturer was able to “get away with” describing sugar as “evaporated cane juice” on a label, while defining evaporated cane juice as sugar on its website, without incurring any liability to consumers who bought the product based upon the label. And that is despite the fact that, in the District Court’s view, the FDA has since decided that the common or usual name for “evaporated cane juice” includes “sugar,” but does not include “juice,” because the “basic nature” of evaporated cane juice is sugar. And yet, the plaintiffs are out of court without leave to amend. How can such a result be lawful and just in this instance, or any other? Could the Swearingen decision forebode a revitalization of the doctrine of caveat emptor?
First, lest excited defense counsel seek to use the Swearingen decision as persuasive authority for disposition of their own cases on a motion to dismiss, they would be wise to determine whether the pleading posture and degree of candor with the Court at the hearing will be the same in their case. Likely not.
Second, perhaps the result in Swearingen is not only lawful and just on this record, but in nearly every case. Perhaps, in this modern information age, knowledge reasonably observable or discoverable about a product necessarily should be deemed to include information reasonably accessible on the manufacturer’s website and/or available to a consumer with a Google search. Certainly, it is obvious, as a matter of law—and in judicially-noticeable form—that in the United States there is today unprecedented access to information, unprecedented product choice, and unprecedented product return options available to consumers. Accordingly, in appropriate circumstances, there seems little reason why information reasonably available to a consumer should not be chargeable to that consumer as actual or constructive knowledge. If a manufacturer chooses to use product labeling terms that are misleading or incomplete, modern consumers in most instances have many available remedies—not the least of which is to put the product back on the shelf and punish the company with a “no” vote, or return the product for a refund. As a practical matter, in today’s marketplace, companies who take chances with consumer goodwill do so at great risk, as the consumer backlash can be instantaneous, public, and widely known, and cause a nearly permanent diminution to the value of the company’s brands. Such circumstances may indeed provide a basis to revitalize the ancient consumer doctrine of caveat emptor, and a corresponding opportunity to reduce the burden of unnecessary consumer class actions on U.S. courts.