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USA - Seventh Circuit Revives Deceptive Labeling Claims Against Parmesan Cheese Manufacturers and Retailers
On December 7, 2020, the Seventh Circuit joined three other circuits—the First, Second, and Ninth—in holding that an accurate fine-print list of ingredients does not foreclose, as a matter of law, a claim that an ambiguous front label deceives reasonable consumers.
Consumer plaintiffs filed five consolidated class action complaints in a multidistrict litigation (“MDL”) proceeding in the Northern District of Illinois, asserting deceptive labeling claims under ten states’ consumer protection laws against several Parmesan cheese manufacturers and retailers. Specifically, Plaintiffs claimed that they were misled by the labels of various grated Parmesan cheese products advertised as “100% Grated Parmesan Cheese,” or some variation thereof, because the products, in fact, also contain non-cheese ingredients—e.g., cellulose and potassium sorbate—to prevent caking and mold.
The district court dismissed the “100% claims” on two grounds. First, the labels were merely ambiguous, not deceptive, such that a reasonable consumer could find clarity by reading the full ingredient list on the back. In the court’s view, “100% Grated Parmesan Cheese” could mean the product is 100% grated, 100% Parmesan, and/or 100% cheese, and this ambiguity could be easily cleared up by reading the ingredient list, which shows the products are not 100% Parmesan or even 100% cheese. Second, the court found that common sense would dictate to a reasonable consumer that despite the “100% cheese” labels, these products must contain other ingredients because they are sold unrefrigerated in grocery aisles.
The Seventh Circuit reversed the dismissals of three of the complaints (but held it lacked jurisdiction over the other two due to untimely appeals). In so doing, it declined to adopt the district court’s “ambiguity rule” out of fear it would encourage deceptive advertising. The court relied on opinions from three sister circuits—Dumont v. Reily Foods Co., 934 F.3d 35 (1st Cir. 2019); Mantikas v. Kellogg Co., 910 F.3d 633 (2d Cir. 2018); and Williams v. Gerber Products Co., 552 F.3d 934 (9th Cir. 2008)—which stand for the proposition that the “reasonable consumer standard does not presume, at least as a matter of law, that reasonable consumers will test prominent front-label claims by examining the fine print on the back label.”
The court agreed with the general principle that deceptive labeling/advertising claims should consider all information available to consumers and the surrounding context, noting that where plaintiffs base these claims on unreasonable or fanciful interpretations of these labels, dismissal may well be warranted. But it was persuaded that this rule did not resolve the case, as Plaintiffs alleged that they conducted consumer surveys showing that 85–95% of consumers understood “100% Grated Parmesan Cheese” to mean that the product contains only cheese. They also submitted affidavits from linguists opining that the most natural and plausible reading of Defendants’ labels is that the products contain entirely Parmesan cheese that is grated.
The Seventh Circuit noted that these questions “may not be answered as a matter of law simply because lawyers can construe an ambiguous claim in a way that would not be deceptive.” It emphasized that the proper inquiry is instead how consumers perceive the advertising and act—i.e., matters of fact, not law—and that “[m]any reasonable consumers do not instinctively parse every front label or read every back label before placing groceries in their carts.”
Defendants also argued that the Fair Debt Collection Practices Act’s (“FDCA”) preemption provision expressly barred states from imposing labeling requirements that are not “identical” to the FDCA. Moreover, they argued that the FDA approved at least one defendant’s use of the “100% Grated Parmesan Cheese” label in 1999 and 2000, thus rendering the Plaintiffs’ challenge both conflict-preempted and barred by state-law safe harbor provisions. The Seventh Circuit disagreed with Defendants’ “overly broad” interpretation of the FDCA’s preemption provision, holding that while states may not require sellers to add additional labeling that is not required by federal law, they may prevent sellers from voluntarily adding deceptive content (the additional modifier of “100%”) to the federally permitted labels. As to conflict preemption and potential safe harbors, the Seventh Circuit determined that Defendants distorted the facts because the FDA never actually assessed whether the proposed “100% Grated Parmesan Cheese” label was nondeceptive under federal law.