In a memorandum opinion and order on Rice v National Beverage Corp* (which accuses LaCroix of falsely marketing its flavored sparkling waters as ‘all natural’), judge Joan B. Gottschall said LaCroix believed it was the victim of a “public smear campaign” that amounted to “financial terrorism.”
LaCroix – which has seen its sales** and share price drop in recent months (although it’s unclear how much if any of that reflects negative PR surrounding the lawsuit) - makes a “sympathetic case,” said Gottschall.
However, there are no grounds for sanctioning the plaintiff or tossing the case at this stage she said (Federal Rule of Civil Procedure 11 provides that a district court may sanction attorneys or parties who submit pleadings for an 'improper' purpose or that contain 'frivolous' arguments or arguments that have no evidentiary support. Sanctions may include financial penalties).
“Defendant relies… on argument and not evidence," said Judge Gottschall.
"And while it may well be successful in proving what it argues on the basis of evidence, its outraged, repetitive brief, characterized by ipse dixit assertions, provides the court with little basis for ruling in its favor. As a result, the motion for sanctions is denied.”
LaCroix: Plaintiff has provided no evidence that the flavoring substances were synthetic in origin
At the crux of this case and a near-identical case (Graham v National Beverage Corp***) filed in January 2019, is whether flavoring substances in LaCroix sparkling water (ethyl butanoate, limonene, linalool and linalool propionate) were sourced from natural ingredients or produced synthetically.
Plaintiff Lenora Rice alleges that the substances are synthetic in origin (without explaining how third party lab testing shows this), while National Beverage Corp argues that its own “biobased and biogenetic carbon testing laboratory accredited under the strict standards set by the International Standards Organization… has conclusively confirmed that LaCroix sparkling water is all natural and contains no traces of synthetic or artificial additives or ingredients.”
In short, LaCroix argues that the plaintiff has smeared its brand – the equity of which is in large part based on its all-natural credentials - without providing any evidence to show that the flavoring components in question were produced synthetically, the core allegation in the lawsuit.
Judge: 'This seems to be a real dispute, and the parties have not provided the court with any adequate basis for resolving it'
In an opinion expressing frustration with National Beverage Corp, however, Gottschall said it had not provided the court with any evidence to help it determine whether the lab testing conducted by the plaintiffs should be disregarded.
“All defendant argues is that its own laboratory is better and determined that the ingredients were all derived from plants. Does defendant maintain that the court can disregard plaintiff’s laboratory’s conclusion and the allegations of the complaint based on a largely unexplained laboratory report attached to the defendant’s Rule 11 motion? The court knows of no way it could do so.”
At this stage in the proceedings, she said, “This seems to be a real dispute, and the parties have not provided the court with any adequate basis for resolving it, neither with respect to how the four ingredients listed in the complaint are derived and/or processed nor with respect to which regulations apply to this dispute.”
Moreover, she added, “At this point, the court is in no position even to agree that an ingredient entirely derived from plants is of necessity ‘all natural’ [bearing in mind that the claims at issue are not about the what’s permitted in ‘natural flavors’ - which are defined in law – but whether the LaCroix beverages in general are ‘all natural,' an ill-defined term the FDA is still exploring].
“Plaintiff argues that the type and degree of processing required must also be considered. This position is not manifestly unreasonable.”
*Lenora Rice et al v National Beverage Corp d/b/a LaCroix Sparkling Waters. Case # 1:18-cv-07151 filed in Cook County Illinois. The plaintiff - who is represented by law firm Beaumont Costales LLC - alleges violations of the Illinois Consumer Fraud Act, breach of express warranties, and unjust enrichment, and seeks to represent a class comprising all individuals in Illinois who purchased LaCroix water in the last four years.
**According to Nielsen data collated by Wells Fargo (total US xAOC including convenience), National Beverage Corp’s sparkling flavored water sales were up 3.8% in the year to June 15, 2019, but were down -12.7% in the 12 weeks to June 15, and down -13.7% in the four weeks to June 15.
*** Adenike Graham and Kimberly McNulty et al v. National Beverage Corporation 1:19-cv-00873 filed in the southern district of New York on January 29, 2019. The plaintiffs allege violations of New York’s Unfair and Deceptive Trade Practices Act, breach of contract/common law warranty, and unjust enrichment. They are represented by Simmons Hanly Conroy LLC, Greg Coleman Law PC, Barbat, Mansour & Suciu PLLC, and Bruca Law, PLLC