The Ninth Circuit’s Road Map on How to Defend California Consumer Fraud Claims

Companies that may face consumer fraud claims in West Coast courts will want to take a close look at the U.S. Court of Appeals for the Ninth Circuit’s recent decision in McGinity v. Procter & Gamble Co. 69 F.4th 1093 (9th Cir. June 9, 2023). The Ninth Circuit provided some much-needed clarity on how lower courts within its jurisdiction should reconcile two seemingly conflicting precedents on how to apply the “reasonable consumer” test to seemingly fanciful claims brought under California’s consumer fraud laws.

Pre-McGinity Cases: Conflicting Guidance

Seven years ago, in the pro-defense Ebner v. Fresh, Inc., the Ninth Circuit upheld the dismissal of claims that the weight indicator on a tube of lip balm was misleading because some of the balm sits in the tube’s screw mechanism and thus is basically unusable. 838 F.3d 958 (9th Cir. 2016). In the legalese equivalent of “give me a break,” the Ninth Circuit noted California state appellate precedent holding that consumer fraud claims must be dismissed if it is improbable “that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled” by the challenged practice or language, and called the plaintiff’s lip balm claims “not plausible.” Id. at 965. The Ebner decision basically counseled district judges to be on the lookout for, and be ready to dismiss, a plaintiff’s allegations that reflect, at best, the reading that “an insignificant and unrepresentative segment” of purchasers might give to a challenged advertisement or language on packaging. Id. at 966.

Ebner reached its pro-defense result by distinguishing an earlier pro-plaintiff case, Williams v. Gerber Products Co., which reversed the dismissal of consumer fraud claims regarding “Fruit Juice Snacks” marketed for toddlers. 552 F.3d 934 (9th Cir. 2008). The front of the snack package depicted “fruits such as oranges, peaches, strawberries, and cherries,” and although the ingredients list on the back accurately showed that the snacks contained none of these fruits’ juices—just “white grape juice from concentrate”—the Ninth Circuit held that the defendant could not rely on the ingredients list to defeat the plaintiffs’ consumer fraud claims at the pleading stage. Id. at 936. Williams suggested that prediscovery dismissals of “reasonable consumer” claims should be “rare” and disagreed that “reasonable consumers should be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box.” Id. at 939.

In the years since Ebner, the Ninth Circuit had not really returned to the subject of when Ebner’s search-and-destroy command applies and when Williams does. The Ninth Circuit cited both cases in Moore v. Trader Joe’s Co., but that was another “give me a break” case that the court saw as an easy, Ebner-like candidate for dismissal. 4 F.4th 874 (9th Cir. 2021). Moore v. Mars Petcare US, Inc., was not a close case, either, with the Ninth Circuit leaning hard on Williams to reverse a pleading-stage dismissal that it thought improper. 966 F.3d 1007 (9th Cir. 2020). Both sides in the class action wars needed a balanced fact pattern to generate some clearer guidance—and in McGinity, the Ninth Circuit finally gave practitioners and the trial courts an expansive discussion of how to apply Ebner and Williams to reasonable consumer challenges.

The McGinity Case

McGinity involved “Nature Fusion” shampoo, with pictures of an avocado, a green leaf, and a vitamin pill on the package. The plaintiff claimed that the packaging was misleading because he thought those vignettes suggested the product was “natural” when, in fact, it contained “non-natural and synthetic ingredients.” McGinity, 2023 WL 3911531, at *2 (9th Cir. June 9, 2023). The plaintiff portrayed the case as similar to Williams, with a deceptive front label that could not be corrected with an accurate ingredients list. The defendant obviously argued that the case fit Ebner’s criteria for pleading-stage dismissal.

The Ninth Circuit sided with the defendant, cogently explaining why. The McGinity court held that for Williams to apply, the defendant actually has to “commit an act of deception on the front of a product.” McGinity, 2023 WL 3911531, at *4. “The front label must be unambiguously deceptive for a defendant to be precluded from insisting that the back label be considered together with the front label.” Id. (citing Ebner). Williams, the court held, was such a case of actual deception, but the “Nature Fusion” label on the shampoo was not. “[R]ather, it is ambiguous . . . [and] does not promise that the product is wholly natural.” Id. The term “could mean any of a number of things,” and where “a front label is ambiguous, the ambiguity can be resolved by reference to the back label,” including the ingredients list and other statements on the packaging. Id. “Upon seeing the back labels,” reasonable consumers looking at the “Nature Fusion” package would not be deceived about the product’s contents. Id.

Where Do Litigants Go from Here?

Although McGinity provides some very helpful guidance, there remains some room for interpretation. The Ninth Circuit’s statement in McGinity that the fruit depictions in Williams constituted actual deception while the avocado and green leaf depictions in McGinity did not has the distinct whiff of caprice about it. Nevertheless, McGinity gives both sides in a reasonable consumer debate a clear target at which to shoot: If the defendant in a consumer fraud case can portray a challenged advertising statement or depiction as ambiguous, the defendant should be able to convince the court to look at the entire package or advertisement for appropriate context. If, instead, the plaintiff in a consumer fraud case succeeds in portraying the challenged statement as actually deceptive, the defendant may not be able to rely on statements elsewhere on the package or advertisement that provide accurate information and would dispel the deception.

Undoubtedly, cases brought in California courts in the near future will give trial judges many opportunities to draw lines between actual deception and ambiguity. Stay tuned.