Mantikas v. Kellogg Co.

          Submitted: May 4, 2018

         Plaintiffs appeal from a judgment of the United States District Court for the Eastern District of New York (Sandra J. Feuerstein, J.) granting Defendant's motion to dismiss Plaintiffs' complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiffs, consumers who purchased Cheez-It crackers labeled "whole grain" or "made with whole grain," filed a class action complaint against Defendant, Kellogg Company, alleging that the whole grain labels were false and misleading in violation of New York and California consumer protection laws. Plaintiffs alleged that the whole grain labels falsely communicated to consumers that the grain in whole grain Cheez-Its was predominantly whole grain, when in fact the primary grain ingredient was enriched white flour. The district court held that the whole grain labels would not mislead a reasonable consumer, and therefore dismissed Plaintiffs' complaint for failure to state a claim. Held, the district court erred in dismissing Plaintiffs' complaint because, under the proper standards for reviewing a motion to dismiss pursuant to Rule 12(b)(6), Plaintiffs plausibly alleged that the whole grain labels would lead a reasonable consumer to believe, incorrectly, that the grain in whole grain Cheez-Its was wholly or predominantly whole grain. VACATED and REMANDED.

          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").

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         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 statements were 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 ...