(CN) — Ghee-maker Ancient Organics must face claims it misled consumers into believing its clarified butter product is healthier than competitors’ products, a federal court in California ruled Friday.
Ancient Organics is a ghee company established in 2003 by two Ayurvedic practitioners. The company’s website says that, in India, where ghee is commonly used in cooking, the founders “were taught the wide praises and benefits bestowed upon ghee by Ayurveda” — a holistic approach to medicine that’s been practiced for thousands of years.
The company packages its product with a label that prominently displays the phrase “EAT GOOD FAT.” The label also says the cooking oil is the “very best fat one can eat,” that it “provides sustained energy levels” and certain fatty acids and vitamins, and encourages consumers to “use this superfood to nourish your mind, body and soul.”
“However, this is false, misleading and deceptive because Defendant’s Products contain high amounts of unsafe fats which increase the risk of severe health issues, including coronary heart disease — the number one killer of Americans every year,” the plaintiffs in the putative class action say in their complaint.
Ancient Organics moved to dismiss the suit, arguing the plaintiffs’ claims were preempted by federal law, that reasonable consumers wouldn’t be misled by the product and that the label statements are “nonactionable puffery.”
But Chief U.S. District Judge Richard Seeborg said in his ruling Friday that Ancient Organics misread the complaint as being solely premised on a theory that the label violates federal regulations.
“In reality, Plaintiffs also allege that the labels are ‘false or misleading because they state, suggest, or imply that [the Product] is healthful, conducive to health, and won’t detriment health, which render it misbranded,’” the complaint states.
Since federal preemption doesn’t apply as the challenged label statements are not “nutrient content claims,” Seeborg said, the question is then whether the complaint sufficiently states that a reasonable consumer is likely to be deceived by Ancient Organics’ statements.
“The answer is, generally, yes,” Seeborg wrote.
“The [complaint] plausibly states that the challenged statements would mislead consumers into believing the Product is healthy for them (or healthier than competing products), but the risks attendant to the high levels of saturated fat render it unhealthy or dangerous,” he continued.
Seeborg added that the only label statement that qualifies as “nonactionable puffery” is the label encouraging consumers to use the ghee to nourish their bodies, minds and souls, as that statement has no concrete meaning “on which a consumer could reasonably rely.” He concluded that the plaintiffs cannot base their theory on that label statement moving forward.
Ancient Organics also argued the consumer plaintiffs lacked standing to sue for products they didn’t purchase. Seeborg cut down this contention, noting the Ninth Circuit has previously decided that named plaintiffs don’t lack standing just because they haven’t purchased some products “in a larger group of challenged products.” But he added that a complaint must still specify which products are being challenged, and the complaint doesn’t say which size container of the ghee the plaintiffs purchased, although it does clearly describe a 32-ounce container.
“Thus, while the motion is denied in this respect, the claims may proceed only on the basis that the label on the 32-ounce size of the Product is at issue,” Seeborg wrote.
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