The recent denial of a tea manufacturer’s motion to dismiss in the Southern District of California demonstrates the risks food manufacturers face when marketing foods without a clear regulatory definition. This risk may increase as manufacturers race to meet evolving consumer preferences, which almost always outpace regulations of innovative product offering trends.
In Cohen v. East West Tea Co., the plaintiff alleges that East West’s Yogi Green Tea Kombucha products are deceptively advertised in violation of California’s statutory and contract laws. At issue in the case is whether East West’s products can be marketed as “organic kombucha” when those products do not contain live organisms. While the parties agreed that kombucha was made from “sweetened tea that is fermented with yeast and bacteria,” East West moved to dismiss the complaint on the basis that no reasonable consumer would be misled by the product’s marketing. In part, East West argued that the product’s instructions, which include boiling the tea bags, would indicate to a reasonable consumer that no active organisms existed in the product.
In denying East West’s motion on Aug. 2, the court noted that the U.S. Food and Drug Administration (FDA) has not defined the term “kombucha.” The court then said the question of whether a business practice is deceptive typically cannot be resolved at the motion-to-dismiss stage. As a result, the court held that “[h]ow a reasonable consumer would define kombucha is a question of fact,” and that both parties offered “plausible” definitions of kombucha. The court again hinted at the lack of FDA guidance on the term by holding that kombucha lacked “an approved [or] agreed upon definition” (emphasis added). Because no regulatory definition existed for kombucha and because it was plausible that consumers would expect live organisms in a product marketed as kombucha, the court held it could not conclude as a matter of law whether reasonable consumers would be deceived.
Manufacturers often believe that the lack of a clear FDA rule or regulation governing their products puts them in the clear to freely market their products without risk. As the Cohen decision makes clear, products lacking such a definition still may risk a false labeling or marketing claim. If anything, Cohen and other recent kombucha lawsuits show that the lack of clear guidance actually may increase manufacturers’ risks by creating more uncertainty plaintiffs can exploit, especially when resisting a manufacturer’s motion to dismiss.
That risk also comes with a steep price tag. Last year, Whole Foods and a kombucha maker settled a false advertising claim for $8.25 million, including more than $2 million in attorneys’ fees. In that case, the plaintiffs alleged that the defendants deceptively mislabeled the kombucha product’s antioxidant, alcohol and sugar contents. See Retta v. Millenium Prods., Inc., Case No. 2:15-cv-01801 (C.D. Cal.). Given the potentially high cost of settlement and uncertainty at the motion-to-dismiss stage, both Cohen and Retta provide a stark reminder that manufacturers should conduct a full review of all labeling and marketing claims to minimize the risk of future litigation, especially in cases where no regulatory definition exists.