Mirabile Dictu! Court Finds Accurate Description Is Not Misleading As A Matter of Law
"No sugar tonight in my coffee"
Michelle Shaeffer purchased a bottle of Cuties Juice in a supermarket in Merced, California. The bottle accurately stated that "no sugar added". Ms. Shaeffer nonetheless thought that she had been misled. In fact, she felt so deceived that she filed a class-action lawsuit alleging that the “No Sugar Added” statement on the Cuties Juice label was fraudulent, misleading and even unlawful.
"No sugar tonight in my tea"
The gist of Ms. Shaeffer's theory was that the Cuties label implies that (1) “competing brands” do “contain added sugar,” such that Cuties Juice “contain[s] less sugar than competing brands that did not have sugar-content claims on their front labels,” and (2) Cuties Juice is therefore “different and healthier than . . . competing brands of tangerine juice. Superior Court Judge Ann I. Jones, however, ruling on the defendant's demurrer found the label was not fraudulent, misleading or unlawful. Last week, the California Court of Appeal affirmed Judge Jones' ruling in an opinion certified for publication. Shaeffer v. Califia, Cal. Ct. Appeal Case No. B291085 (Feb. 6, 2020). Writing for the Court, Justice Brian M. Hoffstadt found that the label was not actionable because (1) a reasonable consumer would make the several sequential inferences necessary to make the statement misleading; (2) adopting the plaintiff's theory would make almost any advertisement "fodder for litigation"; and (3) to do so would be contrary to the weight of authority.
Securities lawyers should breathe a collective sigh of relief. Imagine if the plaintiff's theory were applied to an issuer's accurate disclosures about itself. For example, an issuer's accurate disclosure of its income per share would be subject to claims that the statement implied that the issuer's income per share was higher than other issuers. The result would not just be fodder but high octane fuel for litigation.
"It's the new splendid lady come to call"
The defendant's name, Califia, is similar to California. Although there are various theories for the origin of California's name, the first written reference to "California" is in a 16th century novel authored by Garci Rodríguez de Montalvo, Las sergas de Esplandián, that describes a noble Queen Califia. The lady depicted on California's seal, however, is not Queen Califia. She is Minerva, the Roman Goddess of wisdom.