Coca-Cola Labeling Challenge Advances

SAN FRANCISCO (CN) - Coca-Cola must face claims that it falsely advertises its signature drink as having no artificial flavors or chemical preservatives, though it contains phosphoric acid, which might be both, a federal judge ruled.

George Engurasoff and Joshua Ogden hope to represent a class against The Coca-Cola Co. and Coca-Cola Refreshments USA Inc.

Though Coke labels state that the soft drink contains neither artificial flavors nor preservatives, consumers say phosphoric acid gives the drink its signature tartness and flavor. Since this ingredient qualifies as both an artificial flavor and chemical preservative, it must be listed as such on the label, according to the complaint.

Coca-Cola disputes whether phosphoric acid qualifies as an artificial flavor or preservative "under the applicable regulations."

Arguing that the claims against it are pre-empted and that relief cannot be granted, Coca-Cola moved to dismiss all causes of action, which include unfair competition, false advertising and breach of implied warranty of merchantability.

Advancing some claims Thursday, U.S. District Judge Jeffrey White issued a mixed-bag ruling Thursday that offered both parties some relief.

The Food and Drug Administration (FDA) defines artificial flavors as ingredients included specifically to add flavor and which are not derived from natural sources like fruit and vegetable juice, plant materials, or dairy products, among other things.

Foods are considered mislabeled under California's Sherman Laws and the federal Food Drug and Cosmetic Act if they contain artificial ingredients without including this information on the label.

Though Coca-Cola argued that phosphoric acid is not on the list of artificial flavors and therefore does not qualify as one, White pointed out that that "these lists are not exhaustive" and that "the absence of phosphoric acid on these lists does not mean that the FDA has made a finding that phosphoric acid is not an artificial flavor." (Emphasis in original.)

The court also found that many artificial flavors are added to give a food or drink a specific flavor or smell, but that the absence of this function does not automatically distinguish a chemical from artificial flavors.

"Neither plaintiffs nor defendants contend that the Coke label makes any direct or indirect representation with respect to the primary recognizable flavor," White wrote. "Accordingly, this regulation, and the authority construing it, is inapplicable."

The court also found it premature to dismiss the case on the possibility that claims about artificial-flavor or chemical-preservative characterizations are pre-empted.

White additionally found that the plaintiffs "sufficiently plead that they did not know that phosphoric acid was an artificial flavor or a chemical preservative, that they would not have purchased Coke if they had known it contained artificial flavoring and/or a chemical preservative, and that they relied on Coke's labels."

For the breach of implied merchantability claims to succeed, however, a plaintiff must demonstrate that a product "did not possess even the most basic degree of fitness for ordinary use," the ruling states.

Here, the plaintiffs "fail to cite to any authority demonstrating a mere alleged labeling violation, in the absence of any allegation regarding the product's basic degree of fitness for ordinary use, is sufficient to state a claim for breach of implied warranty," White wrote.

This claim may be amended, but White declined to set a deadline for such revisions since it is possible that the action may be consolidated with similar cases. The next case management conference is set for Sept. 26.

White concluded with a warning for the class attorneys that the court will scrutinize any request for attorneys' fees because they have spent "additional unnecessary hours" on the case, such as filing a "fifteen page brief along with voluminous exhibits addressing issues that went far beyond the legal application of the Supreme Court's case" when ordered to provide supplemental briefings.

Paul Merrit filed a state court class action in October 2013 advancing similar accusations that Coca-Cola's mislabeled Coke as all-natural despite the presence of phosphoric acid, which he says is an artificial flavor and a chemical preservative.

Ronald Sowizrol is the lead plaintiff in a federal class action filed this past March, claiming that Coca-Cola mislead consumers into believing that Coke can be part of a kid's healthy diet by claiming the drink contains no artificial flavoring even though it contains phosphoric acid.

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