UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK

FRITO-LAY NORTH AMERICA, INC. “ALL NATURAL” LITIGATION

x : : : : : : x

CASE NO. 1:12-CV-408-RRM-RLM; 1:12-MD-02413-RRM-RLM

REPLY IN SUPPORT OF DEFENDANTS’ MOTION TO DISMISS PLAINTIFFS’ COMPLAINT

ECF Case

ORAL ARGUMENT REQUESTED

TABLE OF CONTENTS

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ARGUMENT ................................................................................................................................. 3

A. THE ENTIRE COMPLAINT MUST BE DISMISSED AS IMPLAUSIBLE ...... 3

1. Frito-Lay’s Explanatory Ring Renders The Plaintiffs’ Claims Implausible ................................................................................................. 3

2. The Term “Natural” Is Not A Statement About How Crops Are Grown ........................................................................................................ 5

B. THE COMPLAINT SHOULD BE DISMISSED UNDER THE PRIMARY JURISDICTION DOCTRINE OR OBSTACLE PREEMPTION ......................... 8

C. THE CLAIMS AGAINST PEPSICO, INC. MUST BE DISMISSED ................ 10

D. ONLY THE NEW YORK PLAINTIFF CAN ASSERT NEW YORK CLAIMS .............................................................................................................. 11

E. THE MMWA AND BREACH OF WARRANTY CLAIMS MUST BE DISMISSED ........................................................................................................ 12

F. STATE SAFE HARBORS FORECLOSE THE PLAINTIFFS’ CLAIMS ......... 13

G. THE PLAINTIFFS HAVE NO STANDING TO BRING CLAIMS FOR PRODUCTS THAT THEY DID NOT PURCHASE .......................................... 14

H. THE INTENTIONAL MISREPRESENTATION, FAL, UCL, CLRA, AND FDUTPA CLAIMS MUST BE DISMISSED UNDER RULE 9(B) ................... 15

CONCLUSION ............................................................................................................................ 15

TABLE OF AUTHORITIES Page(s)

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Cases

Ackerman v. Coca-Cola Co., No. CV-09-395(JG), 2010 WL 2925955 (E.D.N.Y. July 21, 2010) ....................................... 5, 8

Alvarez v. Chevron Corp., 656 F.3d 925 (9th Cir. 2011) .................................................................................................... 14

Am. Home Prods. Corp. v. Johnson & Johnson, 672 F. Supp. 135 (S.D.N.Y. 1987) ........................................................................................... 13

Am. Protein Corp. v. AB Volvo, 844 F.2d 56 (2d Cir. 1988) ....................................................................................................... 10

Anderson v. Bunhgee Int’l Mfg. Corp., 44 F. Supp. 2d 534 (S.D.N.Y. 1999) ........................................................................................ 12

Cardona v. Target Corp., No. 12-1148, 2013 WL 1181963 (C.D. Cal. Mar. 20, 2013) .................................................. 5, 6

Chill v. Gen. Elec. Co., 101 F.3d 263 (2d Cir. 1996) ..................................................................................................... 15

Cox v. Gruma Corp., No. 12-CV-6502 YGR (N.D. Cal. June 7, 2013) .................................................................... 3, 9

DaimlerChrysler Corp v. Cuno, 547 U.S. 332 (2006) .................................................................................................................. 14

DBT Gmbh v. J.L. Min. Co., 544 F. Supp. 2d 364 (S.D.N.Y. 2009) ...................................................................................... 13

Degelmann v. Advanced Med. Optics Inc., 659 F.3d 835 (9th Cir. 2011) ...................................................................................................... 9

Eerie Railroad v. Tompkins, 304 U.S. 64 (1938) .................................................................................................................... 12

Fletcher v. Atex, Inc., 68 F.3d 1451 (2d Cir. 1995) ..................................................................................................... 11

Freeman v. Time, Inc., 68 F.3d 285 (9th Cir. 1995) ................................................................................................ 3, 4, 5

Goshen v. Mut. Life Ins. Co., 98 N.Y.2d 314 (2002) ............................................................................................................... 12

Granfield v. Nvidia Corp., No. C 11-05403 JW, 2012 WL 2847575 (N.D. Cal. July 11, 2012) ........................................ 14

Guerrero v. Target Corp., 889 F. Supp. 2d 1348 (S.D. Fla. 2012) ..................................................................................... 13

Hairston v. South Beach Beverage Co., Inc., No. 12-1429, 2012 WL 1893818 (C.D. Cal. May 18, 2012) ............................................ 4, 5, 12

Hill v. Hoover Co., 899 F. Supp. 2d 1259 (N.D. Fla. 2012) .................................................................................... 13

Hitt v. Arizona Beverage Co., LLC, No. 08-cv-809, 2009 WL 449190 (S.D. Cal. Feb. 4, 2009) ........................................................ 8

TABLE OF AUTHORITIES (continued)

Page(s)

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Holk v. Snapple Beverage Corp., 575 F.3d 329 (3d Cir. 2009) ..................................................................................................... 10

Hughes v. Ester C Co., No. 12-CV-0041 (JFB), 2013 WL 1080533 (E.D.N.Y. Mar. 15, 2013) ..................................... 5

In re ConAgra Foods Inc., 908 F. Supp. 2d 1090 (C.D. Cal. 2012) ...................................................................................... 7

In re Grand Theft Auto Video Game Consumer Litig., 251 F.R.D. 139 (S.D.N.Y. 2008) .............................................................................................. 12

In re Toyota Motor Corp., 785 F. Supp. 2d 883 (C.D. Cal. 2011) ...................................................................................... 12

Kuenzig v. Kraft Foods, Inc., No. 8:11-cv-838-T-24 TGW, 2011 WL 4031141 (M.D. Fla. Sept. 12, 2011) ....................... 4, 6

Lerner v. Club Med, Inc., 562 N.Y.S.2d 556 (2d Dep’t 1990) ........................................................................................... 11

Lewis v. Casey, 518 U.S. 343 (1996) .................................................................................................................. 14

Liberty Mutual Insurance Co. v. WAWA Tours, Inc., CV-07-880(CPS), 2007 WL 2743500 (E.D.N.Y. Sept. 19, 2007) ........................................... 15

Magnus v. Fortune Brands, Inc., 41 F. Supp. 2d 217 (E.D.N.Y. 1999) ........................................................................................ 12

Mahon v. Ticor Title Ins. Co., 683 F.3d 59 (2d Cir. 2012) ....................................................................................................... 15

McCloud v. Bettcher Indus., Inc., 935 N.Y.S.2d 815 (4th Dep’t 2011) .......................................................................................... 10

Nat’l Comm’cs Ass’n, Inc. v. Am. Tel. & Tel. Co., 46 F.3d 220 (2d Cir. 1995) ......................................................................................................... 9

NECA-EBEW Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145 (2d Cir. 2012) ..................................................................................................... 15

Peters v. Keyes Co., No. 10-60162-CIV, 2010 WL 1645095 (S.D. Fla. Apr. 21, 2010) ........................................... 14

Phillips Petroleum v. Shutts, 472 U.S. 797 (1985) .................................................................................................................. 12

Prudential Home Mortg. Co. v. Super. Ct., 66 Cal. App. 4th 1236 (1998) ................................................................................................... 15

Reers v. Deutche Bahn AG, 320 F. Supp. 2d 140 (S.D.N.Y. 2004) ...................................................................................... 11

Shady Grove Orthopedic Associates, P.A. v. Allstate Insurance Co., 130 S. Ct. 1431 (2010) .............................................................................................................. 12

Smith v. Wm. Wrigley Jr. Co., 663 F. Supp. 2d 1336 (S.D. Fla. 2009) ..................................................................................... 13

TABLE OF AUTHORITIES (continued)

Page(s)

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State of Florida, Office of Attorney General v. Tenet Healthcare Corp., 420 F. Supp. 2d 1288 (S.D. Fla. 2005) ..................................................................................... 14

Verzani v. Costco Wholesale Corp., No. 09 Civ. 2117, 2010 WL 3911499 (S.D.N.Y. Sept. 28, 2010) .......................................... 3, 5

Vicuna v. Alexia Foods, Inc., No. C 11-6119 PJH, 2012 WL 14797507 (N.D. Cal. Apr. 27, 2012) ...................................... 13

Von Koenig v. Snapple Beverage Corp., 713 F. Supp. 2d 1066 (E.D. Cal. 2010) ................................................................................ 8, 14

Williams v. Gerber Products, Inc., 552 F.3d 934 (9th Cir. 2008) ...................................................................................................... 8

Wilson v. Frito-Lay North America, Inc., No. 12-1586 SC, 2013 WL 1320468 (N.D. Cal. Apr. 1, 2013) ................................................ 11

Statutes

28 U.S.C. § 2072 ........................................................................................................................... 12

Fla. Stat. § 501.212 ....................................................................................................................... 13

General Business Law § 349 ................................................................................................... 12, 13

General Business Law § 350 ......................................................................................................... 12

For more than 30 years, federal regulators, states, industry and consumer groups have

maintained that a food can be labeled “natural” based solely on what happens to a crop after

harvesting, and not on whether the crop is grown “organically” or without bioengineering. The

plaintiffs do not dispute that point—a concession that should end this case. The complaint does

not allege that Frito-Lay has violated FDA’s policy on “natural,” or that Frito-Lay wrongfully

labeled its products “organic” or “non-GMO.” Indeed, nowhere in the complaint do the

plaintiffs contend that Frito-Lay has done anything inconsistent with, or contrary to, any

applicable or relevant piece of regulatory guidance on food labeling. To the contrary, Frito-Lay

has diligently followed all available guidance published by its regulators for every product in this

case.

Moreover, the Opening Brief also demonstrated that the “made with all natural

ingredients” text is surrounded by an explanatory ring providing: “No MSG – No Preservatives –

No Artificial Flavors.” This ring tracks the repeatedly articulated meaning of “natural” as being

a statement about what is either added, or not added, to crops harvested from the soil. Frito-Lay

tells the consumer—on the front of the package—that “made with all natural ingredients” means

no artificial flavors, preservatives or MSG have been added.

Rather than respond to Frito-Lay’s central arguments, the Opposition largely ignores

them. Instead of providing any alternative and plausible account of the explanatory ring

surrounding the “made with all natural ingredients” statement, the plaintiffs address it in a

footnote, citing inapposite cases holding that consumer confusion is not always dispelled by text

on the back of a package. Opp. 8 n.7. But the explanatory ring is part and parcel of the very

front-of-pack label that the plaintiffs challenge. It cannot be dismissed out of hand or wished

away. It is hornbook law that labels must be read as a whole and in context.

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Similarly, in response to the unbroken line of authority explaining that a “natural” food

label does not mean “organic,” “non-GMO,” “GMO-free,” or “not bioengineered,” the plaintiffs

declare—again via footnote—that they “are unaware of this theory having been advanced, much

less accepted, in any case in any court.” Opp. 12 n.10. To be clear, the plaintiffs do not dispute

any of the regulatory guidance and authority. And the reason they are “unaware” of it is

straightforward: while “natural” litigation has proceeded for nearly a decade (in more than 250

cases), not until very, very recently has any plaintiff ever conjured up a “natural” lawsuit based

upon the assertion that the method used to grow the crop rendered the end product “unnatural.”

The FDA has repeatedly stated that bioengineered foods are the same as non-

bioengineered foods for purposes of food labeling. See MTD 13-15. FDA, USDA, and FTC

have all expressly stated their views that “natural” refers to the methods of post-harvesting

processing, in direct contrast to “organic,” which refers to the method of growth. MTD 7-12. In

the decade in which FDA has aggressively policed food labels and “natural” claims in particular,

FDA has never issued a warning letter, made a public statement, or taken any enforcement action

against a “natural” label on the ground that a product contains ingredients grown with the benefit

of biotechnology. Against the enormous weight of this regulatory guidance and history, the

plaintiffs allege nothing more than their personal and subjective belief that “made with all natural

ingredients: No MSG – No Preservatives – No Artificial Flavors” is a deceptive statement about

biotechnology. But that is objectively unreasonable and wrong: Frito-Lay did not say these

products were “organic,” “non-GMO,” “GMO-free,” or “non-GMO certified”—product

statements that actually address biotechnology and can be seen in the aisles of any supermarket.

For this reason—and for the other reasons in Frito-Lay’s opening memorandum—the

Court should dismiss the complaint. That is also true for the claims asserted against PepsiCo,

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which is not pleaded as the “alter ego” of Frito-Lay, and which does not even make or sell any of

the products in this case. In the alternative, before opening the floodgates of civil liability on this

issue, this Court should follow the tentative ruling in Cox v. Gruma Corp., No. 12-CV-6502

YGR, slip op. at 2 (N.D. Cal. June 7, 2013) (attached as Exhibit A), staying a case asserting an

identical theory under the primary jurisdiction doctrine.

ARGUMENT

A. THE ENTIRE COMPLAINT MUST BE DISMISSED AS IMPLAUSIBLE

1. Frito-Lay’s Explanatory Ring Renders The Plaintiffs’ Claims Implausible

Frito-Lay’s stamp, reprinted in the complaint, is composed of two key elements: (1)

the center text: “made with all natural ingredients”; and (2) an explanatory ring around that

center text: “No MSG – No Preservatives – No Artificial Flavors.” These two elements form

a single, unified stamp. As Frito-Lay demonstrated (MTD 19-20), the explanatory ring

unambiguously shows that the “made with all natural ingredients” text means that Frito-Lay

has added no artificial ingredients—MSG, preservatives, or artificial flavors—to its products.

See also Compl. ¶¶ 53-54 (citing USA Today article stating products “will lose all of th[o]se

additives” and that “American consumers are howling for foods made without artificial

additives, preservatives and colors”). The stamp, read as a whole, makes no claim that the

corn in the food was grown using “organic” or “non-GMO” techniques. See MTD 4-5, 19.

Accordingly, even if this Court does not reach Frito-Lay’s broader argument regarding the

meaning of “natural” on food labels (see infra 5-7), it should dismiss the complaint because,

under black letter law, no reasonable consumer can permissibly ignore the explanatory ring.

See, e.g., Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir. 1995); Verzani v. Costco

Wholesale Corp., No. 09 Civ. 2117, 2010 WL 3911499, at *2 (S.D.N.Y. Sept. 28, 2010);

Kuenzig v. Kraft Foods, Inc., No. 11-cv-838, 2011 WL 4031141, at *9 (M.D. Fla. Sept. 12,

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2011).1

The Opposition largely ignores Frito-Lay’s argument that the label must be read as a

whole. The plaintiffs nowhere dispute Frito-Lay’s statement (MTD 19-20) that consumers

who do read the ring understand that “made with all-natural ingredients: No MSG – No

Preservatives – No Artificial Flavors” makes no claim about bioengineering. That, in and of

itself, is fatal to their complaint. The plaintiffs’ only response to the ring—in a footnote—is

to assert that the ring is “less prominent” than the center text, a concession that the plaintiffs’

case rests entirely on their suggestion that, under the law, their claim can be based on part of

the label, stripped out of context. Opp. 8, n.7. This argument fails for two reasons:

First, it is foreclosed by the complaint, which repeatedly alleges that plaintiffs were

“exposed” to the labels. See Compl. ¶¶ 17-21. Nowhere do plaintiffs allege that they read

only the “made with all natural ingredients” text yet turned a blind eye to “No MSG – No

Preservatives – No Artificial Flavors.” Nor would any such allegation be plausible.

Second, the plaintiffs’ position is squarely foreclosed by well-settled law. In

Freeman, the Ninth Circuit held that under California law “no reasonable reader c[an] ignore

. . . [t]he qualifying language [in a promotion that] appears immediately next to the

representations it qualifies.” 68 F.3d at 289. Similarly, in Hairston v. South Beach Beverage

Co., Inc., No. 12-1429, 2012 WL 1893818, at *5 (C.D. Cal. May 18, 2012) (attached as

Exhibit B), the Court explained: “the selective interpretation of individual words or phrases

from a product’s labeling cannot support a . . . claim.” Here, as in Hairston, the labels “do

1 Frito-Lay’s marketing materials—quoted throughout the complaint—make the same point as the explanatory ring, noting that “[t]he products made with all natural ingredients do not have any artificial or synthetic ingredients, and they do not contain any artificial flavors or artificial preservatives, or ingredients such as monosodium glutamate (MSG).” See, e.g., Compl. ¶ 31. These marketing materials never say the products are “organic” or “non-GMO.”

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not simply state that it is ‘all natural’ without elaboration or explanation.” Id. Because the

product “does not use the ‘all natural’ language in a vacuum,” it “will be impossible for

Plaintiff to allege how the ‘all natural’ language is deceptive without relying on the . . .

language that appears immediately below the challenged ‘all natural’ language.” Id. at *4

n.3; accord Verzani, 2010 WL 3911499, at *2 (dismissal under New York law) (“A

reasonable consumer reading the tray’s label would not pick out ‘shrimp’ to the exclusion of

all the information on the label.”).

Indeed, the only cases the plaintiffs point to involve misleading labels on the front of

packages, which were not cured by disclosures on the back of the package. See Ackerman v.

Coca-Cola Co., No. CV-09-395(JG), 2010 WL 2925955, at *16 (E.D.N.Y. July 21, 2010)

(nutrition label on the back did not cure misleading marketing on the front); Hughes v. Ester

C Co., No. 12-CV-0041 (JFB), 2013 WL 1080533, at *17 (E.D.N.Y. Mar. 15, 2013)

(“disclaimer on the back” did not “eliminate[] the possibility of a reasonable consumer being

misled”). Frito-Lay’s explanatory ring is on the front of the package—indeed, it is part of

the very same stamp that the plaintiffs assert is actionable—which means that a reasonable

consumer cannot ignore it. See Freeman, 68 F.3d at 289; Hairston, 2012 WL 1893818, at

*5; Verzani, 2010 WL 3911499, at *2. The complaint should be dismissed on this ground.

2. The Term “Natural” Is Not A Statement About How Crops Are Grown

Frito-Lay also demonstrated that federal agencies, states, industry and consumers

groups have consistently maintained that “natural” labels describe how food is processed

after harvesting. MTD 6-18. The plaintiffs, by contrast, rely on nothing other than ipse dixit

allegations that they personally and subjectively believe “natural” means “non-GMO.”

Compl. ¶¶ 17-21. That is insufficient to state a plausible claim, as a matter of law. See

Cardona v. Target Corp., No. 12-1148, 2013 WL 1181963, at *13 (C.D. Cal. Mar. 20, 2013).

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Plaintiffs’ essential position is that “the plausibility of consumers’ interpretations of

food labeling” is a question of fact reserved for a jury. Opp. 6-7. This is wrong as a matter

of law; Frito-Lay cited a host of cases dismissing food labeling challenges at the 12(b)(6)

stage predicated on objectively unreasonable and implausible interpretations of labels. MTD

16 & n.4 (collecting cases). Most closely on point is Cardona, a case featured prominently

in Frito-Lay’s opening memorandum (id. at 18-19), yet ignored entirely by the plaintiffs. In

Cardona, the court dismissed a challenge to the use of the word “pure” on a honey product

because, among other reasons, agency guidance made clear that “it is the addition of other

ingredients that makes claims of ‘purity’ misleading.” 2013 WL 1181963, at *13 (emphasis

in original). In Cardona, the plaintiff contended a consumer deception claim should go

forward because “the FDA had expressly declined the invitation to regulate the term ‘pure,’”

just as the plaintiffs here make the same point about the term “natural.” Id. But as Frito-Lay

has done here, the defendant in Cardona presented guidance from federal regulators about

what “pure” means. The district court in Cardona rightly concluded, based on the regulatory

guidance, that the plaintiff “could not plausibly allege that Defendant’s Honey Products are

not pure.” See id. (the plaintiff “does not, and her Opposition does not . . . allege Defendants

added any ingredients to their Honey Product to make the term ‘pure’ misleading”).

This case is on all fours with Cardona: whatever personal views the plaintiffs may

have about terms like “pure” or “natural,” those views do not state plausible claims when

they flatly contradict regulatory guidance dating back more than 20 years. See also Kuenzig,

2011 WL 4031141, at *9 (since “percent fat free” claims “have been expressed based on

weight for food products in general for more than seventeen years” plaintiffs may not claim a

label is “misleading or misrepresent[s] that its ‘percent fat free’ claim is based on calories”).

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The plaintiffs seek to salvage their complaint by pointing to Monsanto’s Glossary,

which defines Genetically Modified Organisms (“GMOs”) as “plants . . . that have had their

genetic makeup altered to exhibit traits that are not naturally theirs.” Opp. 7-8; see also id.

(asserting that “other industry, government, and health organizations” share Monsanto’s

definition of “GMOs.”). This is a definition of GMOs; it does not address food labeling.

And in any event, this purported definition would prove too much. Through selective cross-

breeding, crops for decades have had their genomes altered in ways that are not “naturally

theirs.” That is why FDA expressly stated “that the new techniques are extensions at the

molecular level of traditional methods and will be used to achieve the goals as pursued with

traditional plant breeding.” RJN, Ex. T.

Likewise, the plaintiffs cannot find recourse in In re ConAgra Foods Inc., 908 F.

Supp. 2d 1090 (C.D. Cal. 2012). The defendant in ConAgra did not present federal, state,

industry or consumer guidance explaining that “natural” labeling concerns what happens to

products after harvesting, not how the crops in the food were grown. See ConAgra Mot. to

Dismiss, No. 11-5379, ECF No. 24 (C.D. Cal. Aug. 24, 2011). Indeed, the plaintiffs’

reliance on ConAgra (see Opp. 6-7 & n.6) is negated by their concession that the “[p]laintiffs

are unaware of [Frito-Lay’s argument] having been advanced . . . in any court” (id. at 12

n.10). Moreover, the labels in ConAgra have no explanatory ring similar to the one on Frito-

Lay’s stamp. ConAgra is not relevant because it did not address the arguments advanced

here and because the statements at the core of the case are different. None of the remaining

cases that the plaintiffs cite involved a selective interpretation of a partial label, read in a

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vacuum, stripped of context, and at war with 30 years of regulatory guidance.2

B. THE COMPLAINT SHOULD BE DISMISSED UNDER THE PRIMARY JURISDICTION DOCTRINE OR OBSTACLE PREEMPTION

Frito-Lay has demonstrated that the FDA has affirmatively permitted the use of

“natural” claims where “nothing artificial or synthetic has been included in, or added to the

food.” RJN, Ex. K. The FDA has also stated it will not “restrict the use of the term natural

except for added color, synthetic substances, and flavors.” RJN, Ex. L. The FDA has also

twice concluded that foods made with the benefits of biotechnology and foods made without

such benefits are to be treated the same for purposes of federal labeling. See MTD 13-15.

The FTC and USDA have similarly maintained that “natural” refers to what happens post-

harvesting, while “organic” refers to the method of growth. If this Court does not dismiss

the case outright, it should solicit the FDA’s views before validating the plaintiffs’ legal

theory. The consequences are significant: given the prevalence of bioengineered crops in

the food supply, virtually any processed food product bearing a “natural” claim could be

subject to class action litigation based on claims of “GMO-deception” that expressly

contradict what regulators, industry, and consumer groups have been stating for decades.3

This Court should follow the course recently adopted in a tentative ruling in Cox v.

2 Von Koenig v. Snapple Beverage Corp., 713 F. Supp. 2d 1066 (E.D. Cal. 2010), and Hitt v. Arizona Beverage Co., LLC, No. 08-cv-809, 2009 WL 449190 (S.D. Cal. Feb. 4, 2009), involved allegations that high fructose corn syrup is an artificial or synthetic ingredient added to beverages and thus not “natural” under the FDA’s natural policy. Ackerman v. Coca-Cola Co., No. CV-09-395(JG), 2010 WL 2925922 (E.D.N.Y. July 21, 2010), concerned allegations that vitaminwater’s name misleadingly suggested that vitaminwater contained only vitamins and water. The fruit-snack label in Williams v. Gerber Products, Inc., 552 F.3d 934 (9th Cir. 2008), represented that the snacks were “Fruit Juice” consisting of juice from the various fruits pictured on the package, when the snacks contained little juice and from fruits not pictured. Id. at 936, 939. 3 88% of the corn grown in the United States in 2012 was grown from genetically modified seeds. RJN, Ex. W. The plaintiffs’ assertion that Frito-Lay has “distort[ed] the facts” regarding the prevalence of genetically engineered foods (Opp. 12) is simply false.

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Gruma Corp., and defer to the FDA’s primary jurisdiction. In Cox, the district court applied

a modified version of the four-part test that the Second Circuit articulated in National

Communications Association, Inc. v. American Telephone & Telegraph Co., 46 F.3d 220,

222 (2d Cir. 1995). Cox, slip op. at 2.4 Cox then explained that the plaintiff’s allegations—

that defendant’s “all natural” labels were false and misleading under California law because

the food was grown using bioengineering technology—fell squarely within the FDA’s

expertise and primary jurisdiction. Id. at 4. Accordingly, the court stated that it was

“inclined to Order that . . . this Action be Stayed a period of six months and referred to the

[FDA] for determination of whether products containing GMO or bioengineered ingredients

may properly be labeled ‘Natural’ or ‘All Natural.’” Id.

This Court does not need to follow Cox because the labels in Cox lacked Frito-Lay’s

explanatory ring, and the Cox court did not have before it the voluminous judicially-

noticeable materials that Frito-Lay presented to this Court, which demonstrate that the

FDA’s “natural” policy already permits Frito-Lay to label its products as “natural.” But

awaiting a response to the court in Cox, or a similar order from this Court, would be an

appropriate alternative to recognizing a legal theory that will subject literally thousands of

food products to a new breed of class action litigation.

Moreover, if any situation cries out for the application of obstacle preemption, it is

this one. Frito-Lay demonstrated that FDA regulatory guidance does have preemptive effect.

See Degelmann v. Advanced Med. Optics Inc., 659 F.3d 835, 841-42 (9th Cir. 2011). The

plaintiffs’ claims are preempted because they directly contradict the FDA’s “natural”

4 The plaintiffs fail to cite the National Communications factors, and do not rebut Frito-Lay’s showing that deference to the FDA is appropriate under those factors. MTD 23-24.

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guidance and guidance on bioengineered foods; indeed, consumers have sued food

companies virtually every week for violating these policies, but in this case Frito-Lay is

being sued despite following them. The plaintiffs’ opposition relies on Holk v. Snapple

Beverage Corp., 575 F.3d 329 (3d Cir. 2009), which addressed FDA’s natural policy, not the

policy on bioengineered foods. Holk itself recognized that non-binding guidance could have

preemptive effect if it sufficiently incorporated public notice and comment (575 F.3d at 340-

42), which Holk did not find for FDA’s “natural” policy but which is demonstrably true for

FDA’s guidance on bioengineering. See MTD 13-15. Moreover, to the extent the plaintiffs

read Holk as holding that FDA guidance can never be preemptive (Opp. 10 n.8 & 9), that is

wrong as a matter of law and directly conflicts with the Ninth Circuit’s decision in

Degelmann, which the plaintiffs fail to mention, let alone address.

C. THE CLAIMS AGAINST PEPSICO, INC. MUST BE DISMISSED

The allegations against PepsiCo are insufficient to make it a proper defendant under

any circumstance. As the plaintiffs admit, to hold a parent corporation liable for its

subsidiary’s conduct, a plaintiff must pierce the corporate veil (Opp. 34-35), which means

“the owners, through their domination [of the subsidiary], abused the privilege of doing

business in the corporate form, thereby perpetrating a wrong that resulted in injury to the

plaintiff” (McCloud v. Bettcher Indus., Inc., 935 N.Y.S.2d 815 (4th Dep’t 2011)). Nothing in

the complaint even remotely suggests that Frito-Lay is an “abuse” of the corporate form or

that PepsiCo and Frito-Lay are “alter egos.” The plaintiffs suggest that PepsiCo and Frito-

Lay share “several key officers” (Opp. 35; Compl. ¶ 34), and that Frito-Lay shares certain

back-office functions with PepsiCo subsidiaries (Compl. ¶ 35). But these are commonplace

in parent-subsidiary relationships and insufficient to pierce the corporate veil. See Am.

Protein Corp. v. AB Volvo, 844 F.2d 56, 60 (2d Cir. 1988) (describing “interlocking

11

directorates” as a “commonplace circumstance of modern business”); Lerner v. Club Med,

Inc., 562 N.Y.S.2d 556, 557 (2d Dep’t 1990) (same).

The plaintiffs’ conclusory allegations of “direct” liability (see Opp. 34) are even more

patently deficient. The complaint does not allege that PepsiCo manufactures, sells, or labels

Tostitos, SunChips, and Fritos Bean Dip. Instead, the plaintiffs allege the formation of an

Americas One Council and a Global Snacks Group in September 2011 (see Compl. ¶¶ 28-

30), but they do not even allege these groups had anything to do with the natural claims

challenged here, which the complaint alleges began in December 2010. See Compl. ¶ 31.

The plaintiffs point to statements by PepsiCo’s head of America’s foods (Compl. ¶¶ 2, 32,

55), whom they inaccurately describe as “Pepsi’s CEO” (Opp. 1-3), but an officer of a parent

company can permissibly talk about the activities of a subsidiary without incurring liability

for the subsidiary’s acts. See Fletcher v. Atex, Inc., 68 F.3d 1451, 1461-63 (2d Cir. 1995).

Moreover, the statements do not reference the products in this case, and the plaintiffs do not

allege they saw or relied on them. Similarly, the fact that a Frito-Lay press release was

posted on PepsiCo’s website (id. ¶ 31) does not support a claim against PepsiCo because the

statement is attributed to Frito-Lay (see ¶ 21) (“PepsiCo’s Frito-Lay Division today said . . .

.”), and more fundamentally, a parent does not become liable for a subsidiary’s statements by

posting them on a website. See Fletcher, 68 F.3d at 1461-63; Reers v. Deutche Bahn AG,

320 F. Supp. 2d 140, 157-58 (S.D.N.Y. 2004); accord Wilson v. Frito-Lay North America,

Inc., No. 12-1586 SC, 2013 WL 1320468, at *3-4 (N.D. Cal. Apr. 1, 2013) (dismissing

PepsiCo where Frito-Lay products were at issue). The plaintiffs likewise do not allege they

relied on the “CEO” statement or the press release. PepsiCo should be dismissed.

D. ONLY THE NEW YORK PLAINTIFF CAN ASSERT NEW YORK CLAIMS

A plaintiff’s claim is generally governed by the law where she purchased the product

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in question. See In re Grand Theft Auto Video Game Consumer Litig., 251 F.R.D. 139, 149

(S.D.N.Y. 2008). And GBL §§ 349(a) and 350 explicitly provide that they apply only to

conduct “in this state.” See Goshen v. Mut. Life Ins. Co., 98 N.Y.2d 314, 325 (2002). Thus,

the New York-law claims asserted by non-New York residents—Gengo (California), Zuro

(California), and Summerlin (Florida)—must be dismissed at this stage. See In re Toyota

Motor Corp., 785 F. Supp. 2d 883, 917 (C.D. Cal. 2011) (motion to dismiss); Magnus v.

Fortune Brands, Inc., 41 F. Supp. 2d 217, 221 (E.D.N.Y. 1999) (same). This decision does

not await class certification (Opp. 31), as the non-New York plaintiffs assert these claims

now. The plaintiffs’ reliance on Shady Grove Orthopedic Associates, P.A. v. Allstate

Insurance Co., 130 S. Ct. 1431 (2010), is baseless, as that case held that state rules governing

class actions did not apply in federal court because Rule 23 is procedural and validly

implemented under the Rules Enabling Act. Id. at 1437-41. Shady Grove did not undermine

the rule of the last 80 years that federal courts sitting in diversity apply state substantive law.

See, e.g., Eerie Railroad v. Tompkins, 304 U.S. 64 (1938). GBL §§ 349 and 350 include

substantive territorial limitations. The plaintiffs are wrong (really wrong) that Rule 23

preempts those limitations; under the Rules Enabling Act, Rule 23 cannot “enlarge or abridge

. . . any substantive right.” See 28 U.S.C. § 2072(b). Moreover, applying New York law to

transactions that occur out of state would violate both choice-of-law rules and due process.

See Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985).

E. THE MMWA AND BREACH OF WARRANTY CLAIMS MUST BE DISMISSED

The plaintiffs’ warranty claims—under the MMWA and state law—likewise fail. A

food label is not a “warranty.” Hairston, 2012 WL 1893818, at *6; Anderson v. Bunhgee

Int’l Mfg. Corp., 44 F. Supp. 2d 534, 540-42 (S.D.N.Y. 1999); see MTD 25 n.7. Tellingly,

the plaintiffs do not cite a single case holding that food labels can constitute a warranty claim

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under the MMWA, and do not show why this Court should depart from the unanimous

caselaw (all cited at MTD 25 n.7 but not addressed by plaintiffs) rejecting MMWA food

labeling claims involving “natural,” “all natural,” and “100% natural.” As to their state law

warranty claims, the plaintiffs have no response to the near-uniform weight of authority that

food product labels are product descriptions and not warranties. The plaintiffs cite only one

case—Vicuna v. Alexia Foods, Inc., No. C 11-6119 PJH, 2012 WL 14797507 (N.D. Cal. Apr.

27, 2012)—that includes little analysis. Even assuming a food label could constitute a

“warranty,” the law of warranties is clear that the entire contract must be interpreted. DBT

Gmbh v. J.L. Min. Co., 544 F. Supp. 2d 364, 377-78 (S.D.N.Y. 2009). Here, the explanatory

ring—saying “No MSG – No Preservative – No Artificial Flavors”—is incorporated into and

explains precisely what the terms of the purported “warranty” are, which dooms plaintiffs’

claims, as they do not allege these “conditions” were breached. The plaintiffs’ Florida

warranty claims also fail because they are not in privity with Frito-Lay. See Hill v. Hoover

Co., 899 F. Supp. 2d 1259, 166-67 (N.D. Fla. 2012) (describing Smith v. Wm. Wrigley Jr.

Co., 663 F. Supp. 2d 1336 (S.D. Fla. 2009) as an “unpersuasive” explanation of Florida law).

F. STATE SAFE HARBORS FORECLOSE THE PLAINTIFFS’ CLAIMS

Florida and New York law provide a safe harbor where the challenged conduct

“complies with [federal] rules and regulations” (GBL §§ 349(d)), or is “specifically

permitted by federal” law (Fla. Stat. § 501.212(1)). The plaintiffs concede the validity of the

safe harbors (Opp. 17), but appear to contend that there must be positive statutory law

expressly authorizing the conduct at issue. Opp. 17. That is wrong. These safe harbors

apply to conduct that complies with “voluntary standards.” See Guerrero v. Target Corp.,

889 F. Supp. 2d 1348, 1358 (S.D. Fla. 2012) (not cited or discussed by plaintiffs); Am. Home

Prods. Corp. v. Johnson & Johnson, 672 F. Supp. 135, 144 (S.D.N.Y. 1987) (erroneously

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distinguished by plaintiffs, given that FDA does enforce its “natural” policy guidance).5

The plaintiffs’ California claims similarly fail because California law provides that

the constraints on organic labeling—including the ban on the use of bioengineering

technology—“shall not apply to the term ‘natural.’” RJN, Ex. P. While the plaintiffs argue

that this law merely “governs the use of the term ‘organic’” (Opp. 19), that section explicitly

refers to “natural” labeling and exempts foods labeled “natural” from the requirements of the

National Organic Program, which prohibits the use of bioengineering.6 The use of a

“natural” label on a food containing bioengineered ingredients therefore is permitted (by

statute) under California law—as Proposition 37’s defeat confirms (see MTD 11-12).

Alvarez v. Chevron Corp., 656 F.3d 925, 935 (9th Cir. 2011).

G. THE PLAINTIFFS HAVE NO STANDING TO BRING CLAIMS FOR PRODUCTS THAT THEY DID NOT PURCHASE

The plaintiffs lack Article III standing as to the 8 products they never bought, as they

cannot rely on injuries “suffered by other, unidentified members of the class.” Lewis v.

Casey, 518 U.S. 343, 357 (1996). A dozen food and beverage class action decisions agree.

MTD 34 & n.10; Granfield v. Nvidia Corp., No. C 11-05403 JW, 2012 WL 2847575, at *6

(N.D. Cal. July 11, 2012) (collecting cases). Plaintiffs cannot evade the rule that a “plaintiff

must demonstrate standing for each claim he seeks to press” (DaimlerChrysler Corp v. Cuno,

547 U.S. 332, 352 (2006)), by relying upon “class standing” (Opp. 33). The Second Circuit

5 The plaintiffs’ reliance on Peters v. Keyes Co., No. 10-60162-CIV, 2010 WL 1645095, at *4 (S.D. Fla. Apr. 21, 2010), is misplaced because no law or guidance regulated the “administrative brokerage fee” at issue. State of Florida, Office of Att’y Gen. v. Tenet Healthcare Corp., 420 F. Supp. 2d 1288, 1310 (S.D. Fla. 2005), is also inapposite, as the defendant “merely cite[d]” a potentially applicable regulation without “supporting analysis or factual discussion.” 6 The plaintiffs cite Holk for the proposition that courts have held that “natural” labels are not protected by California’s safe harbor. Opp. 19. But the quote is not even from Holk; it is from Von Koenig, 713 F. Supp. 2d at 1077, which did not discuss section 110885 and is thus irrelevant.

15

has rejected the claim that a party may rely on Rule 23 to cure Article III shortcomings. See

Mahon v. Ticor Title Ins. Co., 683 F.3d 59, 64-65 (2d Cir. 2012). Nor does NECA-EBEW

Health & Welfare Fund v. Goldman Sachs & Co., 693 F.3d 145, 158 (2d Cir. 2012), assist

the plaintiffs, as that case simply permitted plaintiffs suing for a misleading registration

statement to later represent a purchaser class regarding that registration statement.

H. THE INTENTIONAL MISREPRESENTATION, FAL, UCL, CLRA, AND FDUTPA CLAIMS MUST BE DISMISSED UNDER RULE 9(B)

The plaintiffs’ fraudulent intent allegations are insufficient under Rule 9(b). MTD

29-31. The plaintiffs attempt to manufacture fraudulent intent by relying upon Frito-Lay’s

“motive” to make money (Opp. 28-29), but the Second Circuit has rejected this overbroad

argument, as it would render “the motive requirement” “meaningless.” See Chill v. Gen.

Elec. Co., 101 F.3d 263, 268 & n.5 (2d Cir. 1996). The plaintiffs point to no particularized

facts that Frito-Lay “knew” that “natural” labels meant “non-GMO,” especially in light of

decades of regulatory guidance stating the opposite. See Liberty Mut. Ins. Co. v. WAWA

Tours, Inc., CV-07-880(CPS), 2007 WL 2743500, at *7 (E.D.N.Y. Sept. 19, 2007).

The plaintiffs’ remaining allegations are similarly formulaic and cannot satisfy Rule

9(b). The plaintiffs do not even allege they saw any of the websites, press releases, or

marketing materials cited in the complaint. These omissions are fatal under Rule 9(b), and

any claims relating to these materials should be dismissed.7

CONCLUSION

For the foregoing reasons, the complaint should be dismissed with prejudice.

7 Plaintiffs’ request for equitable relief must be stricken because they have adequate remedies at law and have not pleaded how they might be irreparably harmed. See Prudential Home Mortg. Co. v. Super. Ct., 66 Cal. App. 4th 1236, 1249-50 (1998). The plaintiffs have not pleaded any facts plausibly suggesting how, even in the alternative, they have sustained irreparable harm.

Dated: June 26, 2013

By:..~'

1_ -_Andrew S. TulumelloJason R. MeltzerGIBSON, DtJNN & CRUTCHER LLP1050 Connecticut Avenue, N.W.Washington, DC 20036-5306Tel: (202) 955-8500Fax: (202) 467-0539

Counsel for Frito-Lay North America, Inc.,and PepsiCo, Inc.

CERTIFICATE OF SERVICE

I hereby certify that on June 26, 2013, I caused the forgoing document to be served on

counsel for all parties through CM/ECF filing.

Dated: June 26, 2013 /s/ Jason R. Meltzer Jason R. Meltzer