Food Labeling Class Actions: The Latest Damages Boon? Navigating the Challenges of Class Certification, Preemption and Standing

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TUESDAY, OCTOBER 1, 2013

Presenting a live 90-minute webinar with interactive Q&A

R. Trent Taylor, Partner, McGuireWoods, Richmond, Va.

Sarah L. Brew, Partner, Faegre Baker Daniels, Minneapolis

Ronald J. Levine, Partner, Herrick Feinstein, Princeton, N.J.

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Food Labeling Class Actions: The Latest Damages Boon? Navigating the Challenges of Class Certification, Preemption and Standing Presented by: Sarah L. Brew, Faegre Baker Daniels, Minneapolis Ronald J. Levine, Herrick Feinstein, Princeton, N.J. Trent Taylor, McGuireWoods LLP, Richmond, VA

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QUIZ

WHY ARE SO MANY NEW CASES BREWING IN THE UNITED STATES? [MULTIPLE CHOICE TEST]

A. Because the tobacco companies coughed up big bucks to the plaintiffs’ lawyers

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B. Because Al Gore invented the internet

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C. Because the U.S. Founding Fathers believed in the right to a jury trial and giving everyone his/her day in court

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D. Because of the growing world focus on obesity and health

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Answer…

And many more factors have contributed to the growing number of cases.

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Increasing World-wide Concern Over Healthy Diets and Obesity

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Food Labeling is an International Issue

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Litigation is a “For- profit” Business – The Playbook • Demonize the industry. • Support certain interest groups. • Use the media to maximum advantage. • Blame a multi-factorial health problem on a single

“ADDICTIVE” or “DANGEROUS” ingredient. • Point to “better” labels in other countries.

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Adding Fuel to the Fire –The Class Action System

• Plaintiffs’ attorneys fees awarded (treble damages)

• Heavy administrative and notice costs

• Every consumer has a claim

• Little showing may be required

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Adding Fuel to the Fire – Social Media and the Web • Plaintiffs’ lawyers scour web advertising • Inspiration from FTC, NAD, FDA, State Ags, public interest

groups in the media • Plaintiffs’ lawyers troll for claimants • Plaintiffs’ lawyers copy each other/ viral stories • Blog comments

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The Industry’s Disadvantages

• Regulated, but not completely

• Highly competitive

• Constantly evolving product lines

• Rapidly changing consumer tastes

• Diet is a subject of strong public interest and concern

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CATEGORIES OF CASES

History: How Did “Natural” Suits Begin?

• 2006: CSPI Sues Cadbury over “100% natural” claim in 7-Up • 2007: Draft Complaint against Kraft re: Capri Sun “natural” claim • 2007: Press release, pumping salt water into chicken not “natural” • 2007: Amicus brief in Splenda case alleging product was not “natural” • 2007: Numerous cases filed alleging Snapple’s products labeled “all

natural” were misleading due to use of HFCS • 2008: More HFCS suits: Arizona Beverages, Nature Valley bars,

Healthy Choice pasta sauce • HFS litigation slowed as manufacturers re-formulated

or changed label claims • Plaintiffs moved on to new targets

for “natural” challenges

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How Does FDA Define “Natural”?

• Holds to the policy it outlined in 1993: “FDA has not established a formal definition for the term ‘natural’, however the

agency has not objected to the use of the term on food labels provided it is used in a manner that is truthful and not misleading and the product does not contain added color, artificial flavors, or synthetic substances. Use of the term ‘natural’ is not permitted in the ingredient list, with the exception of the phrase ‘natural flavorings.’”

• “Natural” only defined in terms of Natural Flavors: The essential oil, oleoresin, essence or extractive, protein hydrolysate, distillate,

or any product of roasting, heating or enzymolysis, which contains the flavoring constituents derived from a spice, fruit or fruit juice, vegetable or vegetable juice, edible yeast, herb, bark, bud, root, leaf or similar plant material, meat, seafood, poultry, eggs, dairy products, or fermentation products thereof, whose significant function in food is flavoring rather than nutritional.

• Has long resisted making any definition for other foods (several petitions have been outstanding for years)

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How Does USDA Define “Natural”?

• 2005 incorporated in Labeling Policy Book its longstanding policy of allowing use of “Natural” where • (1) product does not contain any artificial flavor/color/chemical preservative per

21 CFR 101.22; and • (2) product/ingredients are only minimally processed

• 2005 Policy modified to add exceptions for (1) ingredients in the National Organic Policy; and (2) corn-derived sodium lactate

• 2006 Hormel petition to codify 1982 memo language with some exceptions

• Sept. 2009 Advanced Notice of Proposed Rulemaking issued with comment period ending 11/09; no further actions taken

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How Does FTC Define “Natural”?

• It doesn’t – case by case basis • Rulemaking process started in mid-1970s; abandoned in 1983,

confirmed case-by-case basis going forward • 2010: Green Guides released, again refused to define • No cases involving food or beverages • Left with the “reasonable basis” substantiation standard:

advertiser/company must have “reasonable basis” for all express/implied claims made in advertising, at time claims are made

• Open question whether FTC would defer to FDA’s definition, per its 1994 Enforcement Policy Statement on Food Advertising

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Holk v. Snapple Beverage Corp., 575 F.3d 329 (3d Cir. 2009) • Held no preemption of “All Natural” claim

• No express preemption clause – FDA policy statement not enough • No field preemption – NLEA states no preemption unless

explicitly preempted under 21 U.S.C. § 343-1, and Congress clearly stated its intent not to occupy field

• No conflict preemption – FDA’s policy statement on “natural” is not a formal definition entitled to preemptive effect

• Numerous courts have since cited and followed • Primary Jurisdiction:

• Court stayed case on primary jx grounds for 6 months • Along with two other Courts, sought FDA guidance on “natural” • FDA responded by letter indicating no action due to lack of

agency resources

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“Natural” Early Targets

• High Fructose Corn Syrup (HFCS) (Snapple, Arizona Beverages, Nature Valley bars, Healthy Choice pasta sauce)

• Citric acid (enzymatically-made, solvent washed) in juices • Alkalized Cocoa (Ben & Jerry’s) • Potassium carbonate (Skinny Girl Margaritas) • Other products made through use of enzymes, solvents,

acids, bases, etc. • By 2011, almost weekly filing of lawsuits

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Ries v. Arizona Beverages, No. 10-01139 RS (N.D. Cal. Mar. 28, 2013)

• Plaintiff challenged ice tea labeling on basis that high fructose corn syrup and citric acid were not “all natural”

• Class initially certified • Plaintiff missed expert disclosure deadline, then discovery

closed • Court granted MSJ:

• Plaintiffs produced no evidence that the ingredients were “artificial”, the factual predicate upon which all claims based

• Plaintiffs produced no evidence of amount of damages • Court also decertified class:

• Plaintiffs’ counsel so dilatory and ineffective as to be inadequate class counsel under Rule 23

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GMOs: 100% Natural Cooking Oils

• In re Wesson Oil Marketing and Sales Practices Litigation • Cases filed by six plaintiffs’ attorneys

• California, Florida, New Jersey • October 13, 2011 MDL assigned cases to

C.D. Calif.

• “100% Natural”—alleges GMOs are not natural

• Claims Plaintiffs were misled and would not have purchased the product but for the misleading statement

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Preemption

• Claim for relief requiring ConAgra to disclose GM ingredients is preempted because draft FDA guidance does not require labeling of GMO ingredients

• But consumer fraud claims are not preempted • Those claims concern decision to label products “100%

Natural” when derived from GMO ingredients • Court refused to read draft guidance to mean “natural” oils and

those from GMOs were the same thing • “It does not follow from these agency statements that ConAgra

can make affirmative representations about whether its products are genetically engineered that are untrue.”

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Sandys/Pappas v. Naked Juice Co., No. CV11-08276 (C.D. Cal. Aug. 7, 2013) • False advertising claim— “Non-GMO” and “All Natural” are

false representations • Allegedly GM ingredients include:

• Soy lecithin • Soy protein

• Claims based on minor ingredients in food • Underscores ubiquity of ingredients from GMOs

• “Almost all soy products are now genetically modified.” • Defendants either know or have “recklessly avoided the truth”

• Class settlement for $9 million; preliminary approval in early August 2013.

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Processing Claims

• Plaintiffs’ attorneys becoming more sophisticated, looking beyond the easy targets to understand how ingredients are actually made (processed).

• Citations to FDA regs and technical/chemical information • Began with HFCS cases: HFCS allegedly not produced by a

natural process • Lockwood v. ConAgra Foods Inc., 597 F. Supp. 2d 1028 (N.D.

Cal. 2009) • Holk v. Snapple, 575 F.3d 329 (3d Cir. 2009)

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Processing Claims: Aromas and Flavor Packs

• Lynch v. Tropicana Products Inc. (D. N.J. Dec. 19, 2011) (later cases filed in 2012)

• Addition of aromas and flavor packs and “extensive processing” “changes the essential nature” of the juice.

• “It is not natural orange juice. It is instead a product that is scientifically engineered in laboratories, not nature, which explains its shelf-life of more than two months.”

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Processing Claims: High Pressure Processing

• Kuenzig v. Kraft and Hormel (M.D. Fla. Feb. 3, 2012) • Challenge to labeling of Hormel “Natural Choice” “100%

Natural” meats, which contain no preservatives because produced through High Pressure Processing (HPP) • Plaintiff says: “Exerting water pressure ‘roughly equal to

five…times the pressure found at the bottom of the deepest ocean’ is not a traditional process capable of being carried out in the average American home's kitchen”

• Claims dismissed: USDA-approved label and claims untimely

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Vitamins

• Hairston v. South Beach Beverage Co. (C.D. Cal. May 18, 2012)

• Plaintiff alleged SoBe Lifewater’s vitamin-enhanced beverages were misleadingly labeled “all natural” • Synthetic forms of B and C Vitamins • Names and images of fruit that are not ingredients in drink

• Claim regarding use of fruit names dismissed because expressly preempted by FDCA (plaintiff conceded)

• “All natural” also dismissed because labels added language “with vitamins” and source of vitamins • No reasonable consumer would read the “all natural”

as modifying the “with vitamins” language • Ingredient list consistent with other statements on label • Court dismissed entire complaint with prejudice

Color Additives

• FDA policy excludes use of “natural” where artificial colors are used

• Artificial colors defined to include “color additives” • “Color additives” include “natural” substances

added solely for color: • “[W]here a food substance such as beet juice is deliberately used

as a color, as in pink lemonade, it is a color additive.” (21 CFR 70.3(f))

• Kane v. Chobani, No. 5:12-cv-02425-LHK (N.D. Cal. July 12, 2013) • Among other things, plaintiff challenged “all natural” labeling

where beet juice was added for color. • Court dismissed beet juice-related claims as implausible; plaintiff

alleged she read the entire label, including the ingredient list (which showed beet juice added for color).

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Other Targets

• Not containing something the labeling suggests it does • Allegedly Untrue “Health” Benefits • Containing More of Something Than Claimed

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Category # 1

• Not containing something the labeling suggests it does

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Sugawara v. Pepsico, Inc. No. 2:08-cv-01335 (E.D. Calif.) • Suit against the maker of Cap’n Crunch’s Crunch Berries

accusing the company of false advertising because the cereal did not contain real berries

• Court dismissed suit ruling that “a reasonable consumer would not be deceived into believing that the product in the instant case contained a fruit that does not exist.”

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Lam v. General Mills, Inc. No. 3:11-cv-05056 (N.D. Calif.) • Suit against the maker of fruit roll-ups alleging deceptive

advertising based on the use of the word “fruit.”

• The plaintiff alleged that she “relied upon the representations [that the product was ‘made from fruit’] in making her decision to purchase the products at [a] premium price.”

• The defendant moved to dismiss, arguing that “Fruit Roll Ups . . . are not marketed as fruit or a substitute for fruit.

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Pom Wonderful LLC v. The Coca-Cola Co. No. 2:08-cv-06237 (N.D. Cal.) • Pom accused Coca-Cola of falsely naming and labeling its

“Minute Maid Enhanced Pomegranate Blueberry Flavored 100% Juice Blend” to suggest it contained mostly pomegranate and blueberry, when it actually had 99.4% apple and grape juices

• Court granted defendant’s MSJ saying that state law claims are preempted by the FDCA because they ask the court to find that the juice blend is misleadingly labeled in spite of compliance with U.S. FDA regs

• “Congress has explicitly allowed labeling that is not misleading, and granted FDA the authority to make such a determination. Defendant has complied with the relevant FDA regulations and is also compliant by extension with the FDCA.”

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Hemy v. Perdue Farms Inc. No. 11-888 (D. N.J. March 31, 2013) • Proposed NJ class claiming that defendant falsely

misrepresented that its chickens were “humanely raised” and “USDA Process Verified” (survived a MTD)

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Recent Lawsuit

• McManus v. Sturm Foods Inc., No. 3:11-cv-00565, S.D. Ill. (alleges that the manufacturer of Grove Square Coffee, a single-serving coffee product designed for use in Keurig coffee makers, misrepresented the nature of the product by suggesting it contained ground coffee rather than instant coffee)

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Category # 2 Allegedly Untrue “Health” Benefits

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Careathers v. Red Bull GMBH No. 13-369 (S.D. N.Y. filed 1/16/13)

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Careathers v. Red Bull GMBH No. 13-369 (S.D. N.Y. filed 1/16/13) • Class action filed challenging the energy drink maker’s claims

that its unique combination of ingredients “gives you wings” and increases performance

• Alleges that a lack of scientific support exists for the claim that Red Bull provides any more benefit than a cup of coffee

• Yet, the complaint alleges, the makers of Red Bull “persistently and pervasively” market their products as a superior energy source worthy of a premium price over coffee or caffeine pills

• Seeks to represent national class and New York Subclass

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Chavez v. Nestle USA Inc. (C.D. Calif.) (9th Cir. 3/18/13) • Suit based on whether Juicy Juice deceptively advertised that

its drinks aided Brain Development and Immunity

• Complaint claims that falsely and deceptively misrepresented that these drinks would enhance brain development and cognitive ability in children, and that the Immunity product would provide immunity from germs and promote digestive health

• These products allegedly cost 20 to 30 percent more than other juice products

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Chavez v. Nestle USA Inc. (C.D. Calif.) (9th Cir. 3/18/13) • Trial court dismissed; 9th Cir. reinstated the claim as to Brain

Development drinks • Claim was not that the benefits did not exist, but that the child

would have to drink an unrealistic amount of juice (1 quart a day) to derive those benefits

• Rejected primary jurisdiction defense • Upheld dismissal of immunity products holding that there was

nothing deceptive about those claims • Dissent: “it is not plausible that any reasonable person would

understand Nestle’s ads to mean that all a child needs is Juicy Juice”

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Thompson v. Innovation Ventures LLC No. 13-00336 (W.D. Pa. 3/7/13) • Proposed class action against the maker of 5 Hour Energy

alleging that the company deceptively touts the product as a source of energy “now” with “no crash later”

• Notes microscopic language on back of bottle that reads, “No crash means no sugar crash”

• Alleges that consumers pay a premium for this when all it does is provide the same amount of caffeine as a cup of coffee

• Alleges breach of express and implied warranty claims and the PA Unfair Trade Practices Act and Consumer Protection Law

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Others

• Ackerman v. Coca-Cola Co., No. 1:09-cv-00395 (E.D. N.Y. July 18, 2013) (alleges that the name Vitaminwater and other label language misled consumers and caused them “to believe that Vitaminwater is simply water fortified with nutrients that will provide certain stated health benefits rather than just another sugary soft drink.”)

• Koehler v. Litehouse, Inc., No. 3:12-CV04055-SI (N.D. Cal., filed Dec. 28, 2012) (alleges claim that Blue Cheese Yogurt Dressing with Probiotics “may boost immunity” and “may enhance the body’s immune system” were unfair, deceptive, and misleading, where defendant knew that the product does not provide those qualities)

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Category # 3 Containing More of Something Than Claimed (Nutrient Content Claims)

• FDA regs specifically define claims and allowable use

• Must meet nutrient levels needed to use specific claim

• If claim not defined, either petition FDA to authorize claim or file notice of prospective claim

• Relative claim requirements (“less sodium” “fewer calories”)

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Elias et al. v. Ungar’s Food Products Inc., et al. No. 2:06-cv-02448 (D. N.J.) • Suit claimed that a food manufacturer’s products, including

vegetarian patties and pancakes, were marketed as containing less fat and fewer calories than they actually had.

• Resulted in settlement of approximately $1.35 million

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Yumul v. Smart Balance, Inc. No. 10-00927 (C.D. Cal. Mar. 14, 2011) • Consumer fraud claim alleging that the manufacturer falsely

and misleadingly labeled Nucoa Real Margarine as having “no cholesterol”

• Court dismissed, holding that these claims were preempted by the NLEA

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Ivie v. Kraft Foods Global Inc. No. 12-2554 (N.D. Cal. 2/25/13)

• Pltf alleged a host of claims, one of which was that she relied on unlawful and deceptive “no artificial sweeteners or flavors” labels in purchasing Country Time Pink Lemonade Drink Mix, specifically claiming that the drink mix contains maltodextrin, an artificial sweetener, and sodium citrate, an artificial flavoring agent

• Court rejected preemption defense as to this claim

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Recent Trends

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Class Trends

• Carrera v. Bayer Corp., No. 1202621 (3d Cir. Aug. 21, 2013) • Held that without receipts or sales records, there may be no

reliable way to identify class members in a false advertising lawsuit

• No ascertainability • Reversed certification of a class of Florida consumers who

claimed that Bayer falsely advertised the metabolism-boosting benefits of its One-A-Day WeightSmart vitamin

• Rejected plaintiffs’ contention that class membership could be determined by retailer records for customer-loyalty cards and online purchases or based on affidavits from consumers

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Legislative and Regulatory Developments

• Proposition 37 in California • Initiative 522 on ballot in Washington State in November 2013 • New Mexico recently rejected an attempt to label genetically

modified food • Connecticut and Maine have both passed GMO labeling laws

this year • Farmer Assurance Provision, Section 735 of HR 933

• Effectively bars federal courts from being able to halt the sale or planting of GMO or GE crops and seeds, no matter what health consequences from the consumption of these products may come to light in the future

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Legislative and Regulatory Developments

• On Sept. 19, 2013, Democratic lawmakers introduced the Food Labeling Modernization Act of 2013, which proposes a sweeping overhaul of food labeling requirements addressing front-of-package labeling and allegedly misleading claims about what foods are ‘healthy,’ ‘natural,’ or ‘made with whole grain.’

• In Aug. 2013, the FDA issued a final rule to define the term “gluten-free” when voluntarily used in food labeling. It is defined as less than 20 parts per million of gluten.

• FDA’s priorities agenda to the remainder of 2013 and 2014 include energy drinks, nanotechnology, arsenic in various foods, and dietary supplements.

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Governmental Investigations/Suits

• See People of the State of California v. Bumble Bee Foods LLC et al., No. RC1211729 (Calif. Sup. Ct., County of Riverside).

• New York AG investigation into Energy Drink Industry

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Governmental Investigations/Suits

• State and local governments are not the only ones pursuing this strategy

• The Federal Trade Commission has won settlements from companies for claims related to a product’s health benefits. In addition, public interest groups are also getting into the act, suing over labeling of various food products

• In the Matter of Pom Wonderful LLC, FTC Docket No. 9344 (Jan.17, 2013)

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Competitor Litigation

• Fresh Del Monte Produce Inc. v. Del Monte Foods Co., No. 1:08-cv-08718 (S.D. N.Y.)

• Western Sugar Cooperative, et al. v. Archer-Daniels-Midland Co., et al., No. 2:11-cv-03473 (C.D. Calif.)

• Pom Wonderful LLC v. The Coca-Cola Co., No. 2:08-cv-06237 (N.D. Cal.)

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The Next Battlefield?

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OVERVIEW OF CLAIMS

Types of Claims

• Deceptive Trade Practices Act • Negligence • Misleading and deceptive advertising • Fraudulent business practices • Unjust enrichment • Common law fraud • Negligent and intentional misrepresentation • Breach of warranty • Breach of applicable state consumer protection acts • Lanham Act false advertising claims

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Where?

• Northern District of California

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Outcomes So Far

• Mixed Success • Some Multi-million dollar settlements

• $35 million settlement (Dannon Yogurt, Activia) • $8.5 million settlement (Johnson v. General Mills Inc., No. 8:10-

cv-00061 (C.D. Calif.)) • Some class actions certified

• Evangeline Red et al. v. Kraft Foods Inc., et al., No. 2:10-cv-01028 (C.D. Calif.).

• Ries v. Arizona Beverages USA LLC, No. 10-01139 (N.D. Calif. 3/28/13) (was decertified and dismissed on MSJ)

• Some outright dismissals

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Outcomes So Far

• $9 million proposed settlement (Pappas v. Naked Juice Co. of Glendora Inc., No. 11-08276 (C.D. Cal.) • $1.4 million in injunctive relief

• Will redesign product labels to eliminate “all natural” language • Will substantiate “non-GMO” claim • Will establish a verification program through an independent testing

organization to confirm accuracy of the “non-GMO” statement on product labels

• Will employ a quality control manager for 5 years to oversee independent testing process

• Will establish and maintain a database to track and verify product ingredients

• $9 million cash fund • Class members with proof of purchase can receive $75 each • Those without can receive between $5 and $45

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Outcomes So Far

• $8.5 million settlement (Johnson v. General Mills Inc., No. 8:10-cv-00061 (C.D. Calif.) (Class action alleging that national marketing campaign for Yoplait YoPlus probiotic yogurt included misleading digestive health claims; consumers will receive $4 for each unit purchased)

• $3 million settlement (In re: Nutella Marketing and Sales Practices Litig., No. 3:11-cv-01086 (D. N.J.)

• $4 million cash fund approved (Dennis v. Kellogg Co., No. 3:09-cv-01786-IEG-WMC, S.D. Cal., 9/10/13) (claims that advertisements asserting that Frosted Mini-Wheats cereal improved children’s attentiveness by 20% were false)

• $4 million settlement (Trammell v. Barbara’s Bakery Inc., No. 12-02664, N.D. Cal., 6/21/13) (class members can receive up to $100 each and company agrees to not label any products containing GMOs or synthetic and artificial ingredients with the phrases “all natural,” “no artificial additives,” “no artificial preservatives,” or “no artificial flavors.”)

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Relief Sought

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What Are Requests For Relief?

• Disgorgement • Refunds • Statutory damages • Treble damages • Injunctive relief • Recalls • Required disclosure of ingredients • Corrective advertising • Corrective labeling • Attorney fees

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DEFENSES

Primary Jurisdiction

• Court has discretion to stay or dismiss without prejudice to permit parties to seek relief from FDA or other regulatory authority with appropriate mandate and technical expertise.

• Is the issue one of first impression? • Does resolution require the specialized knowledge or expertise

of an agency? • Is there any indication that the agency intends to provide

guidance? • Has the agency affirmatively declined to provide guidance?

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• Invoking the primary jurisdiction doctrine to dismiss claims where the central question in the case – whether milk protein concentrate is a permitted ingredient in yogurt – was held to be “squarely within the competence and expertise of the FDA, pursuant to the authority granted to the Agency by Congress”).

• Ruling bolstered by fact FDA had issued a proposed rule that, if implemented, would have allowed MPC in yogurt

Taradejna v. General Mills, No. 12-993 (D. Minn. Dec. 10, 2012)

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Cox v. Gruma Corp., 2013 U.S. Dist. LEXIS 97207 (N.D. Cal. July 11, 2013) • Judge Yvonne Gonzalez Rogers concluded that FFDCA and

NLEA “unquestionably and squarely give [the] authority” to FDA to “determin[e] whether food labels may properly state that GMO products can be labeled ‘all natural.”’

• Court stayed the case and asked FDA to address “the question of whether and under what circumstances food products containing ingredients produced using bioengineered seed may or may not be labeled ‘Natural’ or ‘All Natural’ or ‘100%.’”

• Parties sent letters to FDA • Defendant advocated for FDA clarification • Plaintiffs said issues of misleading labeling can be

handled by courts; no need for FDA to weigh in

Van Atta v. General Mills, Inc., No. 12-cv-02815 (D. Colo. July 18, 2013) • No. 12-cv-02815 (D. Colo. July 18, 2013) • Magistrate held that the “central question in this matter clearly

falls within the FDA’s regulatory authority,” and is “not within the conventional experience of judges.”

• No need to refer the same issue to FDA given Cox v. Gruma. • Court ordered the case closed and noted that either party may

move to reopen upon a showing that the “final administrative action contemplated by the Recommendation has occurred.”

Barnes v. Campbell Soup Co., No. 12-cv-05185-JSW (N.D. Cal. July 25, 2013) • Judge Jeffrey S. White stayed the case under the primary

jurisdiction doctrine and referred to FDA for an administrative determination the question of “whether and under what circumstances food products containing ingredients produced using bioengineered ingredients may or may not be labeled as ‘Natural,’ ‘All Natural,’ or ‘100% Natural.’”

• FDA’s decision to refrain from regulating the term “natural” “does not remove the presumption that Congress squarely empowered that authority to FDA pursuant to the FDCA and NLEA,” and “deference to the FDA’s regulatory authority continues to remain the appropriate course.”

Courts Denying Primary Jurisdiction Stay

• Krzykwa v. Campbell Soup Co., No. 12-cv-62058-WPD (S.D. Fla. Aug. 9, 2013)

• In re ConAgra Foods, Inc., No. CV 11-05379-MMM-ARG (C.D. Cal. Aug. 12, 2013)

• In re Frito-Lay N. Am., Inc. All Natural Litig., No. 12-MD-2413, 2013 WL 4647512 (E.D. N.Y. Aug. 29, 2013)

• Janney v. Mills, No. C 12-3919 PJH, 2013 WL 1962360, (N.D. Cal. May 10, 2013)

• But more motions pending . . .

Preemption

• Express Preemption under the NLEA: • No state may “directly or indirectly” establish any requirement for a

food or the labeling of a food that is “not identical” to an applicable (specified) federal regulation. 21 U.S.C. § 343-1(a)(1)-(5).

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Preemption

• Yumul v. Smart Balance, Inc., No. 10-00927, 2011 BL 339172, at *9 (C.D. Cal. Mar. 14, 2011)

• Held that consumer fraud claims brought under the CA Consumer Legal Remedies Act relating to the alleged false and misleading labeling of Nucoa Real Margarine as having “no cholesterol” was preempted by the NLEA

• The court reasoned that Smart Balance complied with the regulatory requirements for labeling a product “cholesterol free” and therefore, its label could not be false or misleading

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Preemption

• Pom Wonderful LLC v. The Coca-Cola Co., No. 2:08-cv-06237 (N.D. Cal.)

• Court granted defendant’s MSJ saying that state law claims are preempted by the FDCA because they ask the court to find that the juice blend is misleadingly labeled in spite of compliance with U.S. FDA regs

• Held that “Congress has explicitly allowed labeling that is not misleading, and granted FDA the authority to make such a determination. Defendant has complied with the relevant FDA regulations and is also compliant by extension with the FDCA.”

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Preemption

• In re Simply Orange Juice Marketing & Sales Practices Litig., No. 12-2361 (W.D. Mo. March 1, 2013)

• Rejected motion to dismiss based on preemption

• Court said that while the FDCA expressly preempts states from imposing any requirement that is not identical to the FDA’s regulation, a state requirement that is identical to federal law is not subject to preemption

• Court noted that in this case, the pltfs’ claim either seeks to enforce state laws that imposed requirements identical to those imposed by federal law or cover matters not within the scope of the FDCA or the NLEA

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Preemption

• Brazil v. Dole Food Co., No. 5:12-cv-01831 (N.D. Cal. March 26, 2013)

• Court rejected preemption argument and found “no indication” in the text of the NLEA which amended the FDCA or its legislative history that Congress “intended a sweeping preemption of private actions predicated on requirements contained in state laws.”

• Court noted that both the U.S. Supreme Court and the 9th Cir. have allowed “parallel claims” in medical device suits

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Particularity

• Brazil v. Dole Food Co., No. 5:12-cv-01831 (N.D. Cal. March 26, 2013)

• “Despite spanning 61 pages, Brazil’s FAC provides little more than a long summary of the FDCA and its food labeling regulations, a formulaic recitation of how these regulations apply to defendants’ products, and conclusory allegations regarding defendants’ ‘unlawfulness.’”

• Complaint “filled with vague assertions that despite general references to multiple categories of state and federal regulations, leave unclear the precise nature of any alleged violation.”

• “While the court does not find that Brazil’s claims are so implausible as to warrant granting defendants’ motion to dismiss on this basis, the court does find that a number of Brazil’s claims lack sufficient particularity.”

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Particularity

• Smedt v. Hain Celestial Group, Inc. No. 12-03029 (N.D. Cal. Aug. 16, 2013)

• “Applying the Rule 9 pleading standard, the Court finds that the Amended Complaint does not provide a clear and particular account of the allegedly fraudulent, deceptive, misrepresentative, or otherwise unlawful statements, and therefore cannot sustain an action for these claims.”

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Safe Harbor Provisions

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Standing

• Miller v. Ghiradelli Chocolate Co., No.12-04936 (N.D. Calif. Apr. 5 2013)

• Pltf brought consumer class action alleging that the defendant’s use of the word “chocolate” on labels of Ghiradelli Chocolate Premium Baking Chips – Classic White deceived consumers into thinking the chips and 4 other white chocolate products included chocolate when they really contained no chocolate, white chocolate, or cocoa derivatives and were imitations

• Court dismissed claims related to 4 of the 5 products because pltf did not purchase those products

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Standing

• In re Simply Orange Juice Marketing & Sales Practices Litig., No. 12-2361 (W.D. Mo. Mar. 1 2013)

• Rejected defense argument that the claims should be dismissed because the pltfs do not allege that they saw advertisements for the juice products

• “Whether plaintiffs actually ever saw ads or advertisements of Simply Orange, MM Premium, and MM Pure Squeezed is not dispositive of the case at hand.”

• Where the alleged misrepresentations and false statements are part of an extensive and long-term advertising campaign, reliance on specific advertisements is not required

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Standing

• Parker v. J.M. Smucker Co., No. 13-0690 (N.D. Calif. 8/23/13) (finding that Pltf had standing to pursue claims about four different oils, although she had purchased only one of those oils, because the other three oils identified in the plaintiff’s complaint are sufficiently similar)

• Anderson v. Jamba Juice Co., 888 F. Supp. 2d 1000, 1006 (N.D. Cal. 2012) (finding standing for pltf where “there is sufficient similarity between the products purchased […] and not purchased […] because the same alleged misrepresentation was on all of the smoothie kits regardless of flavor; all smoothie kits are labeled ‘All Natural,’ and all smoothie kits contain allegedly non-natural ingredients.”)

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Breach of Warranty

• Smedt v. Hain Celestial Group, Inc. No. 12-03029 (N.D. Cal. Aug. 16 2013)

• “The Court rejects this argument because food labels, like the ones at issue here, do not constitute express warranties against a product defect.”

• “Labels on product packaging and websites are ‘product descriptions rather than promises that [a food product] is defect-free, or guarantees of specific performance levels.”

• See also Hairston v. S. Beach Beverages Co., No. CV 12-1429-JFW (C.D. Cal. May 18, 2012); Astiana v. Dreyer’s Grand Ice Cream, Inc., No. C-11-2910 (N.D. Cal. July 20, 2012); Jones v. ConAgra Foods, Inc., No. C 12-01633 (N.D. Cal. Dec. 17, 2012)

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Class Certification Issues

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SETTLEMENT

Potential Costs of Settlement

• Notice

• Administrative

• Class Counsel

• Claims

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The Settlement Calculation

• Anticipating the number of potential claims which will be filed

• Factoring risks in claims process

• Common fund settlements

• Equitable relief

• Remediation program

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Handling Leftover Funds

• Additional class member distributions

• Cy pres

• Return to defendant

• Escheats

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Three Issues to Consider

• Adequacy of Notice

• Business Benefits from Settlements

• Crooks

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Trending - The Twenty-first Century Class Action

• Electronic Notice/Social Media

• Settlement Insurance

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Risk Management

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RISK MANAGEMENT STRATEGIES

Table Stakes: Compliance with Labeling Regulations • Seven basic label elements • Nutrient content claims (express and implied) • Health claims (substantiation, approval, know your risk) • Flavors and flavor cues • Know other labeling requirements specific to your industry

• Dairy (SOIs and flavor labeling) • Juice labeling • Dietary supplements • Food for kids

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Know Your Industry and the Trends

• Keep ahead of the risk curve • Benchmark (but don’t rely upon) your competitor’s labels • Understand consumer perception and how it is changing • Watch CSPI, CU and others – often the vanguard • Look beyond U.S. borders

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Overall Net Takeaway Test

• Label is more than the sum of its individual parts • Combination of claims

• Each claim by itself may be fine, but do two or more claims, taken together, imply a third message?

• Combination of claim + graphics • E.g., Heart picture + benign copy = implied health claim?

• Vignettes by themselves (especially fruits) • E.g., Gerber Suit:

• “Fruit Juice Snacks” with photos of fruits • But snacks didn’t contain juice from those fruits • 9th Circuit reversed dismissal, allowed class

action to go forward

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Coordinate Early!

• Two ways of building claims: 1. Develop product, then let marketing

figure out the claims; or 2. Understand target market and expected

claims, and (re)formulate to that market and claims

• Second approach gets Marketing, Quality and Legal involved in early development, helping build product and the label

• Helps build substantiation necessary for claims

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Most Important: Uniform Process and Procedures

• Situations to avoid: 1. The Last Minute Approval:

• “I need to get this to the printers in 3 hours to make our deadline, can you please take a look”?

2. Nobody Asked Me: • “Of course you can’t make that claim. If you had asked me, I would

have told you our product does not qualify for a “gluten free” claim because ingredient X contains gluten”

3. Never Approved That: • “That wasn’t the label I approved!”

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Show Your Work

• Develop and document a claims evaluation framework • Establish substantiation for different types of claims • Maintain substantiation files

• Certain claims require different or more stringent substantiation • E.g., health claims

• Address both express and implied claims • Substantiation required in advance (FTC)

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• Understand Marketing’s desire to make claims does not necessarily stem from studies showing increased sales

• Ask: • Why are we making this claim? • What do we expect to gain and on what basis do we believe that?

• Do the risk-benefit analysis • What is chance we will be sued? • What is worst case scenario if we are sued (assume millions)? • How will the brand suffer if faced with suit (even if we win)? • Weigh that against expected benefit of claim

Know When Not To Make the Claim

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Questions?

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