Judge S. James Otero of the Central District of California issued his second order denying Defendant Coca-Cola’s motion to dismiss Plaintiff POM Wonderful’s complaint concerning advertising for Coke’s “Minute Maid® Enhanced Pomegranate Blueberry Flavored 100% Juice Blend”. Judge Otero’s decision raises important issues concerning exposure to Lanham Act claims for companies whose products are subject to FDA regulation, the standing of companies to bring suits against competitors under California’s Unfair Competition Law (“UCL”), and the scope of the restitution remedy available under the UCL.
This case is one of the latest of a series of cases that POM has brought against competitors. According to POM’s complaint, the “main” ingredients in Coke’s juice blend are neither pomegranate, nor blueberry, but instead apple and grape juice. Coke’s first motion to dismiss argued that POM’s claims were preempted by the Federal Food, Drug and Cosmetic Act and FDA regulations. That motion was granted in part and denied in part. The Court essentially held that to the extent POM’s Lanham Act claim implicated federal juice naming and labeling requirements, it was improper, but to the extent the claim was directed at Coke’s broader advertising, it could proceed.
After POM amended its complaint, Coke again moved to dismiss, arguing: (1) POM’s Lanham Act claim was still improperly directed at the naming, labeling, and packaging of Coke’s juice blend and (2) POM lacked standing to pursue its UCL and False Advertising Law (“FAL”) claims because POM had not “lost money or property” due to Coke’s allegedly false advertising. Judge Otero denied the motion.
In his decision, Judge Otero held that POM’s Lanham Act claim could continue because it was still not certain whether POM’s claims focused on the naming and labeling of the juice blend, or Coke’s advertising and marketing. For instance, Judge Otero stated POM’s complaint had allegations aimed at Coke’s website, which “place a ‘prominent image of a split open pomegranate’ next to the Juice name, and advertise the Juice . . . as ‘cranberry and pomegranate juice.’” According to Judge Otero, these “informal cues” could be considered advertising or marketing and subject to a Lanham Act claim. Moreover, to the extent there was “informal naming and labeling” on Coke’s website, it would not implicate FDA regulations, and thus could also be the subject of a Lanham Act claim.
Judge Otero also rejected Coke’s argument that POM lacked standing to pursue its UCL and FAL claims. The Court noted that standing under the UCL and FAL is limited to plaintiffs who have “‘suffer[ed] losses of money or property that are eligible for restitution.’” Although the California Supreme Court has made clear that the restitutionary remedy under the UCL is limited to the return of money or property that a defendant took directly from a plaintiff, and POM had merely alleged lost market share and profits, Judge Otero still held POM has alleged facts entitling it to restitution and thus had standing. The Judge reasoned that restitution under the UCL is also proper if the plaintiff has lost money or property in which it has a “vested interest,” and POM had a “vested interest” in profits derived from Coke’s allegedly unlawfully increased market share. As such, POM had standing to bring its UCL and FAL claims.
In allowing POM’s case against Coke to proceed, Judge Otero’s decision raises a number of important issues. For companies selling products subject to FDA regulation, Judge Otero’s conclusion that Coke’s website may be subject to a Lanham Act claim because it has “informal” advertising and marketing may justify an advertising review for certain products. Furthermore, Judge Otero’s decision represents another instance in which a court has tied standing under California’s UCL to eligibility for restitution, an issue that may well be addressed in another case, Kwikset Corp. v. Superior Court, currently pending before the California Supreme Court. Finally, by finding POM may be entitled to “restitution” of the profits Coke generated from POM’s allegedly lost market share, Judge Otero’s decision raises the question of whether it has interpreted the restitution remedy available under the UCL to be indistinguishable from damages, which the California Supreme Court has clearly held are not available under the UCL.