Court Denies Motion to Dismiss Brought by Manufacturer of Four Loko in Putative Class Action Lawsuit: Yourth v. Phusion Projects, LLC

450px-Four_Loko_Beverage_Large_Can.jpgA federal judge in New York denied Phusion Projects’ motion to dismiss a putative class action lawsuit alleging damages caused by its product, the energy drink Four Loko. The lawsuit, Yourth v. Phusion Projects, LLC, alleges that the company failed to warn consumers of potential negative effects of the beverage’s allegedly high levels of both caffeine and alcohol. Phusion argued that the plaintiff’s claim was moot because of a settlement offer the company made, and that federal law preempted the plaintiff’s state law claims. The court rejected the defendant’s arguments and denied its motion.

Four Loko is a beverage containing both caffeine and alcohol, marketed to young adults as an “energy drink.” The plaintiff, Jeremiah Yourth, alleges in his amended complaint that a typical unit of Four Loko, which is sold in 23.5-ounce cans, potentially has the same effect as six beers and two cups of coffee. Because of its composition, the beverage can allegedly mask the effects of alcohol consumption and thereby cause injury. According to the plaintiff, Phusion did not disclose the potential harm of its beverage to consumers.

The plaintiff did not assert any personal injuries in his complaint, but rather violations of New York’s deceptive business practices law, false advertising, and unjust enrichment. He alleges that he purchased multiple Four Loko beverages in reliance on the company’s marketing and labeling, and that this gives him standing as a consumer to bring suit. His damages consisted of economic injuries sustained by his purchase of the beverages at what he called a “price premium,” when the products were in reality worthless. Had he known the alleged reality of Four Loko’s health effects, he claims that he would not have purchased the product. He asserts grounds for certification as a class action under the Federal Rules of Civil Procedure, although at the time of the defendant’s motion to dismiss, he had not moved for class certification. The amended complaint requests restitution and other damages for the plaintiff and the class members.

Phusion moved to dismiss the amended complaint for lack of subject matter jurisdiction. Specifically, it argued that its offer to refund the plaintiff’s expenditures on Four Loko, as well as his legal fees and expenses, rendered his lawsuit moot. It also alleged that the federal Alcoholic Beverage Labeling Act (ABLA), 27 U.S.C. §§ 213 et seq., preempted the plaintiff’s state law claims. The ABLA contains a provision for labeling requirements and expressly states that these requirements preempt conflicting state laws. Finally, the defendant alleged that the plaintiff failed to state a viable claim for relief. The court rejected all of these arguments.

The court disagreed with the defendant’s mootness argument, finding that such a general rule would enable a defendant to avert class certification indefinitely by offering settlements to representative class members. It held that the defendant made its settlement offer soon after the plaintiff filed his complaint, and that the plaintiff did not unduly delay moving for class certification afterwards. The court also ruled that the ABLA’s labeling provisions did not necessarily apply to non-alcoholic ingredients in drinks, so the statute would not automatically preempt a claim for caffeine in an alcoholic beverage.

Lebowitz & Mzhen’s products liability attorneys are skilled at pursuing justice for people in Maryland who have been injured by faulty, dangerous, or defective products. Contact us today online or at (800) 654-1949 for a free and confidential consultation.

Web Resources:

Memorandum-Decision And Order (PDF file), Case No. 1:11-CV-1261, Yourth v. Phusion Projects, LLC, U.S. District Court, Northern District of New York, September 27, 2012

More Blog Posts:

Energy Drinks Allegedly Cause Maryland Teen’s Death from Caffeine Toxicity, Maryland Accident Law Blog, March 21, 2012
Maryland Teen Dies After Falling from Moving Vehicle, Mother Blames Alcoholic Beverage Manufacturer, Maryland Accident Law Blog, March 5, 2012
DC Area Teen’s Family Files Wrongful Death Lawsuit Against Four Loko Manufacturer, Washington DC Injury Lawyer Blog, May 30, 2011
Photo credit: ‘Four Loko Beverage Large Can’ by Austin Uhler (Own work) [Public domain], via Wikimedia Commons.

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