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FOOD LITIGATION 101: Are you up to speed?

By Elaine Watson+

29-Nov-2016
Last updated on 29-Nov-2016 at 17:51 GMT2016-11-29T17:51:49Z

FOOD LITIGATION TRENDS 101: Are you up to speed?

There have been hundreds of class action lawsuits directed against food and beverage companies in recent years over everything from evaporated cane juice to Non-GMO claims. But has the false advertising litigation trend peaked, and if not, what are the new areas of vulnerability for food companies? 

According to defense attorneys we quizzed this week, ‘natural and ‘healthy claims are still providing fertile ground for plaintiff’s attorneys, despite the fact that many of these cases are being stayed by the courts on primary jurisdiction grounds in the wake of FDA probes into both terms.

Meanwhile, the overall number of cases being filed vs food companies in 2016 (around 135-140 so far) looks set to be fairly similar to the number in 2015 (around 158), says Perkins Coie partner David Biderman: “We’ve probably missed a few, and we don’t count as separate all the cases where the same complaint is filed in multiple jurisdictions, but we do try and monitor them reasonably closely, and I don’t really see a slowdown.”

Other topics providing fertile ground for plaintiff’s attorneys include:

  • ‘Slack fill’ cases (whereby plaintiffs allege shoppers are being misled by large containers without enough product in them);
  • Sugar under fire cases (whereby product X purports to be good for you but allegedly contains ‘unhealthy’ levels of sugar eg. Truxel et al v General Mills  coupled with evaporated cane juice lawsuits  now back in play thanks to finalized FDA guidance);
  • Non-GMO claims (whereby reasonable consumers wouldn’t expect non-GMO and/or natural claims on products containing meat or dairy from cows fed GM feed eg. Schneider et al vs. Chipotle Mexican Grill Inc );
  • Pesticide residues (whereby reasonable consumers wouldn’t expect a ‘natural’ product to contain even trace levels of herbicides such as glyphosate. eg. The Organic Consumers Association, Moms across America and Beyond pesticides v General Mills Inc );
  • Made with ‘real fruit’ claims (whereby product X purports to be made from whole fruit but in fact uses fruit juice concentrates eg. Atik and Lau et al vs Welch Foods Inc., a cooperative, and the Promotion in Motion Companies Inc );
  • Prop 65 cases (whereby product X contains allegedly risky levels of heavy metals/toxins and the company failed to warn consumers of said risks);
  • Worker classification lawsuits (whereby company X categorizes staff as independent contractors rather than full-blown employees eg. Castagna et al v. Hampton Creek );
  • POM v Coke style cases (whereby company X allegedly misleads shoppers by implying that a product has higher levels of an expensive/nutritious ingredient than it actually has. eg. POM argued - ultimately unsuccessfully - that Coca-Cola willfully misled consumers by marketing a product comprised almost entirely of apple & grape juice as ‘Pomegranate Blueberry,’ when the juice contained just 0.3% pomegranate juice, 0.2% blueberry juice and 0.1% raspberry juice... and 99.4% of cheaper apple & grape juice.)
  • Supply chain lawsuits (eg. company X allegedly used child labor).

How many more packs will I actually sell if I use the word ‘healthy’ or ‘natural’ on the label?

In general, predicts Adam Fox, managing partner of the Los Angeles office of Squire Patton Boggs, we can expect more cases over sugar, fat, protein, probiotics, prebiotics and other macro or micronutrients, in part because the science is evolving and in part because health & wellness is becoming a more integral part of food formulation and marketing.

Similarly, as grass-fed, Paleo, animal welfare and similar claims start to gain traction, plaintiff’s attorneys may start exploring what ‘reasonable consumers’ expect from products bearing such labels, and find an opportunity to litigate, says Ryan Kaiser, chair of the Class Action and Business Litigation team at Amin Talati: “Trends in food litigation tend to follow trends in food marketing.

“What I’d like to see is better communication and collaboration between food marketers, food scientists and regulatory experts, because so often companies don’t sit down and do the calculation: how many more packs will I actually sell if I use the word ‘healthy’ or ‘natural’ on the label? How important is it to put this on our packaging?

“Most of the time if you ask them they don’t know the answer to these questions, but they should, because when you send them a legal bill saying this is what it just cost you [to defend that term] and you ask, did we sell enough to cover that? it certainly makes you think.

“The amount companies are spending on defending these lawsuits is astronomical, and in many cases it’s avoidable. With the slack fill cases, for example, it’s so easy to put a fill-line on your packaging, or have a clear viewing strip.”

“What I’d like to see is better communication and collaboration between food marketers, food scientists and regulatory experts, because so often companies don’t sit down and do the calculation: how many more packs will I actually sell if I use the word ‘healthy’ or ‘natural’ on the label? How important is it to put this on our packaging?"

Ryan Kaiser, chair of the Class Action and Business Litigation team at Amin Talati

POM v Coke legacy

While legal experts dispute its broader significance, the POM v Coke case (POM accused Coca-Cola of willfully misleading consumers by marketing a product comprised almost entirely of apple & grape juice as ‘Pomegranate Blueberry') has raised some difficult issues, says Adam Fox at Squire Patton Boggs,

While Coca-Cola ultimately prevailed at trial,  he says, it serves as a reminder that complying with the letter of the law may not entirely insulate you from liability in a false advertising lawsuit brought by a rival.

GMO labeling law won’t necessarily spell the end of ‘non-GMO’ lawsuits

Meanwhile, just because a new federal GMO labeling law is now in the pipeline (it passed this year but the details are still being thrashed out by USDA) doesn’t mean that lawsuits over Non-GMO claims will disappear, observes Angel Garganta, a partner in Venable’s commercial litigation practice group and co-chair of its class action defense group.

According to the bill recently signed into law  by President Obama, organic certified products will be allowed to use the term ‘non-GMO.’ However, products that don't meet the 'bio-engineered' definition in the bill will not automatically be allowed to be labeled as non-GMO if they are not organic, says the bill, which creates an area of uncertainty which plaintiff’s attorneys can exploit – as indeed, they are already doing  – he predicts.

What happens to most false advertising cases?

As to what happens to most false advertising cases once they are filed, it depends on a multitude of technical factors, many of which seem to the casual observer to have little to do with the actual merits (eg. is this label actually deceptive?). Few are thrown out completely after a motion to dismiss, and many drag on for years as plaintiffs are given the opportunity to amend their complaints and tweak their arguments.

Many lawsuits also show up in the records as voluntarily dismissed, which could mean that the plaintiff has changed his mind, but often indicates that the parties have come to a private settlement, notes David Biderman at Perkins Coie.

“As these are not public settlements, we don’t know how much money is changing hands, but the fact that so many of these cases are still being filed suggests that the plaintiff’s attorneys think it’s worth it.”

In many cases, adds Adam Fox at Squire Patton Boggs, it doesn’t actually cost a whole lot of money to file a case; the costs ramp up as things progress, when customized consumer research is required, or experts need to be procured, and as a defendant may decide to throw in the towel and settle long before then, plaintiff’s attorneys are not necessarily making a big gamble financially.

Indeed, with the exception of the POM v Coke case (which was brought by a company, not a consumer), none of the false advertising cases we have covered on FoodNavigator-USA in recent years have gone to trial. They are either dismissed or settled – privately, or through the courts – because a trial is so expensive.

"Of course there are bottom feeders in the food area that are just shakedown artists, but in California, the law does require you to notify the company [via a demand letter] before you file a lawsuit. I’d also argue that most companies know damn well they are doing it [what they are being accused of], the problem is, they just got caught."

Steve Gardner, heads of the food law practice at the Stanley Law Group, Dallas, Texas

Extortion, or common sense?

At the other end of the spectrum, meanwhile, are cases in which cases are not filed at all, but money changes hands nevertheless.

In such cases, demand letters are sent out, and for whatever reason, defendants may choose to pay plaintiff’s attorneys to go away, whether they think they are in the right or not, because it’s cheaper and easier than mounting a legal defense.

Whether you think this is blackmail, or a more sensible way of dealing with issues privately before the courts - and the media - get involved, depends on which side of the fence you’re sitting on of course, says Steve Gardner, who heads the food law practice at the Stanley Law Group of Dallas.

If they are good cases, I’m all in favor of resolving things without litigation, which is what should happen when everything else fails.”

Of course there are a few bottom feeders out there…

But isn’t this a little, well, unsavory, if not unethical?

According to Gardner: “If a company changes a practice as a result of your demand letter, is it fair that you caused the positive change, but you don’t benefit [financially]?”

He adds: “Of course there are bottom feeders in the food area that are just shakedown artists, but in California, the law does require you to notify the company [via a demand letter] before you file a lawsuit. I’d also argue that most companies know damn well they are doing it [what they are being accused of], the problem is, they just got caught.”

‘It’s just blackmail’

David Biderman at Perkins Coie, meanwhile, has a less generous interpretation, however: “It’s just blackmail,” while Angel Garganta at Venable observes that “What you see in the filings is just the tip of the iceberg. There are attorneys out there that do nothing but send out demand letters and have no intention of filing actual lawsuits.”

And this puts defense lawyers in a tough spot, says one attorney who asked not to be named: “What are you going to say to a client? ‘You could pay $10,000 to get rid of this, or you can wait for them to file the case, we can move to dismiss it, and it can cost you $50,000 or $100,000 or more’.”

‘Consumers shouldn’t have to be lawyers or food scientists in order to go shopping’

Do false advertising lawsuits filed against food companies reflect legitimate consumer concerns, or are they largely meritless, money-making exercises?

Talk to food brands slapped with lawsuits because they've used ascorbic acid in ‘natural’ products or made a non-GMO claim on a dairy product in which the cows are fed GM feed, and they will argue that these are ‘frivolous’ cases without genuine ‘victims.’

Indeed, the flurry of lawsuits that often follows the publication of FDA warning letters over some pretty obscure issues has also raised some eyebrows in the trade (are consumers really up in arms about technical violations of nutrient content claims?) says Angel Garganta, a partner in Venable’s Commercial Litigation Practice Group and Co-Chair of the Class Action Defense Group.

“One thing that’s changed the game is the internet. Now every time the FDA sends out a warning letter it goes up on the website and the plaintiff’s bar jumps on it, even though some technical violation of a labeling law does not necessarily equal consumer deception.”

Plaintiff's attorney Steve Gardner at Stanley Law Group, however, says consumers are sick of being duped by food companies peddling their products as healthy and natural when a closer inspection of the ingredients list suggests they are anything but. Consumers, he says, “shouldn’t have to be lawyers or food scientists in order to go shopping,” and if most consumers think that ‘natural’ products should not contain any pesticide residue, for example, that’s their prerogative.   

While some judges might beg to differ, he says, that’s not their job. “Luckily most judges allow consumers to be consumers and don’t substitute their own judgement. I actually like getting a conservative judge because I know that he or she is going to apply the law in these cases [he cited the recent Ninth circuit opinion  in a case vs Dole Foods, where the court felt reasonable consumers might well feel that “synthetic citric and ascorbic acids in Dole’s products were not natural"]."

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