Litigation Strategies for Responding to Significant Consumer Threats
I've been invited to speak this Friday at the University of Oregon School of Law's symposium entitled "Cultivating Our Future: New Landscapes in Food and Agricultural Law and Policy" as a part of the "Food for Thought - Strategies for Advocacy" panel.
I'll outline a series of tools food lawyers can and should use to assist their clients in responding to significant consumer claims. I'll explain:
1. How a client can determine whether a claim has merit,
2. What should be done the moment any significant claim is received,
3. The importance of determining a trial strategy at the earliest possible moment, and
4. The three types of consumer claims seen most often and how to respond to each.
An advance copy of my slide-deck can be found here.
Aurora Dairy Organic Milk Case: Eighth Circuit Preempts Some Claims And Remands Others
As we reported some time ago, a class action suit was pending in the Eastern District of Missouri against Aurora Dairy, its organic certifier and certain retailers for violation of state consumer protection laws. The district court had dismissed the case on the grounds that all claims were preempted by the Organic Foods Production Act of 1990 (OFPA), and the plaintiffs appealed to the court of appeals for the Eighth Circuit. On September 15, the Eighth Circuit affirmed the dismissal of some of the claims and remanded the remaining claims to the district court.
Nineteen class action suits across the nation had been consolidated into a single action in the Eastern District of Missouri. In a consolidated class action, the plaintiffs made claims against Aurora Dairy Corporation, a certified organic dairy located in Boulder, Colorado, QAI, Inc., a certifying agent under the National Organic Program administered by the USDA, which had certified Aurora’s milk as organic, and certain retailers who had sold Aurora’s milk under Aurora’s brand as well as under their own store brands. A total of 57 counts were brought against the several defendants, on theories ranging from violation of state consumer protection laws to violation of implied warranties under the Uniform Commercial Code to unjust enrichment and negligence per se. The district court dismissed all the claims on the grounds of so-called “conflict preemption”, where allowing states to regulate an area would conflict with Congress’s regulation scheme.
The Eighth Circuit agreed with the conflict preemption analysis as it related to QAI, the certifying agent, which was dismissed from the case in full, and as it related to the labeling of the products as “organic” based on the certification by QAI.
To the extent the class plaintiffs, relying on state consumer protection or tort law, seek to set aside Aurora’s certification, or seek damages from any party for Aurora’s milk being labeled as organic in accordance with the certification, we hold that state law conflicts with federal law and should be preempted.
The court of appeals disagreed, however, with the district court on other claims, stating,
Preempting state law claims unrelated to the decision to certify, and certification compliance, does not advance the purpose of establishing national standards for organic foods. Nor does preemption of the facts underlying certification advance the goals of assuring consumers that organics meet a consistent standard, or in facilitating interstate commerce in organics.
The court remanded the case to the district court to determine, based on the standards in its decision, which claims would survive against Aurora and the retailers. This was due in part to the district court having not decided, on the grounds that it was moot, motions by the defendants to strike the consolidated complaint and by the plaintiffs’ motion to the amend it. Thus, the district court’s first task would be to decide those motions before it can determine what claims, if any survive.
Peeled, Inc. Seeks Injunction, Damages in Trademark Infringement Suit Against Peeled Fruit LLC
Originally posted on the Essential Nutrition Law Blog by Jonathan Stagg
Peeled, Inc. (“Peeled”) www.peeledsnacks.com, a company specializing in healthy, natural snack foods including dried fruits and dry roasted nuts, recently filed a trademark infringement suit in the United States District Court for the Southern District of New York against Peeled Fruit LLC (“Peeled Fruit”) www.simplypeeled.com. Peeled Fruit sells frozen soft-serve fruit, with fresh fruit toppings. Peeled alleges that Peeled Fruit is attempting to cash in on the brand awareness and goodwill associated with Peeled’s marks.
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Peeled began marketing its products under the marks “Peeled,” “Peeled Fruit,” and “Peeled Snacks” as early as 2004. Since that time, Peeled’s marks have received extensive coverage in television and print media, including receiving a coveted spot on Oprah’s O List as one of Oprah’s favorite afternoon snacks, and receiving the 2008 “Best of Food” award from Health Magazine. Peeled registered the mark “PEELED SNACKS” on January 10, 2006 with the United States Patent and Trademark Office..jpg)
Peeled alleges that Peeled Fruit not only knew about Peeled’s use of the marks, Peeled Fruit “adopted the trademarks with the intent to trade and capitalize on the goodwill generated by Peeled, Inc.’s extensive and widespread use of its trademarks, as well as its extensive sales, advertising and consumer acceptance and recognition.” Peeled argues that the similarities between the products sold by both companies make the shared use of the marks likely to cause confusion, mistake and deception among consumers.What's in a Name? - Trade Organizations Push for HFCS Flexibility
The Corn Refiners Association (the “CRA”), a trade organization representing the US corn refining industry, recently petitioned the Food and Drug Administration (the “FDA”) to allow the term “corn sugar” as an alternative label declaration for high fructose corn syrup (“HFCS”). The the FDA’s decision on whether to approve the renaming is expected to take up to two years.
The CRA is advocating the renaming, stressing that HFCS, despite the name, is not actually high in fructose. There are three different types of HFCS one that is 55 percent fructose and 42 percent glucose (HFCS 55, most commonly found in soft drinks) - one that is 42 percent fructose and 58 percent glucose (HFCS 42, usually used in food products), and one used for specialty applications that is 90 percent fructose and 10 percent glucose (HFCS 90, typically used to blend with HFCS 42 to make HFCS 55). Buttressing the CRA’s claim is an American Dietetic Association study that also reached the conclusion that HFCS contains proportions of fructose and glucose that are similar to sugar.
While the CRA’s stated objective in pursuing the alternative label declaration for HFCS is achieving greater clarity for consumers, this change may also yield economic benefits for companies that use HFCS in their products. According to a recent report by market research organization Mintel, a majority of consumers surveyed claim to avoid products in which HFCS is listed as one of the first ingredients. This preference is strongest among more affluent and better educated consumers. HFCS has faced significant levels of negative publicity in recent years, reaching a crescendo with the 2004 publication of a study in the American Journal of Clinical Nutrition highlighting the parallel between obesity and the rise in high fructose corn syrup consumption, and hypothesizing that the two could be related. The study’s authors have since said they were wrong in their speculation, and the American Medical Association has concluded that HFCS “does not appear to contribute more to obesity than other caloric sweeteners”, but as the results of consumer surveys and sales data indicate, the backlash against HFCS has continued. There is precedent for this type of rebranding, as in November of 2009 Ajinomoto rebranded its aspartame sweetener as “AminoSweet” based on many of the same issues at play in the current discussion of HFCS.
A Tale of Two Orders
Two recent court orders in motions to dismiss consumer fraud class actions illustrate the fine lines that exist in the analytical process courts engage in when determining whether or not a claim may continue forward.
In Zeisel v. Diamond Foods, Inc., the U.S. District Court for the Northern District of California denied Diamond Foods' motion for dismissal of the plaintiff’s claims. The complaint alleged that the plaintiff and other consumers in the class purchased the company’s shelled walnut products based on false claims of health benefits that consumption of the omega-3 fatty acids in walnuts provides. The complaint alleged (1) unfair competition, (2) false advertising, (3) violation of California’s Consumers Legal Remedies Act and (4) unjust enrichment.
Diamond Foods moved for dismissal on the basis that the plaintiff’s claims were preempted by the Federal Food, Drug and Cosmetic Act (the “FDCA”), as amended by the Nutrition Labeling and Education Act (the “NLEA”). The court found that the plaintiff’s claims were not expressly preempted on the plain language of the NLEA’s preemption clause, and further that the plaintiff’s unfair competition claims were based on California’s Sherman Food, Drug and Cosmetic Law, not the FDCA. The court also held that the plaintiff’s claims were not impliedly preempted, as Congress expressly stated its intent that the NLEA was not to be construed to preempt any provision of state law, unless such provision is expressly preempted under section 403A of the FDCA. As such, the plaintiff’s claims were allowed to move forward.
However, in Loreto v. Procter & Gamble, the background and core issues of which we blogged about here and here, the U.S. District Court for the Southern District of Ohio granted Procter & Gamble’s motion for dismissal, and dismissed the plaintiffs’ claims with prejudice. The plaintiffs alleged that Procter & Gamble violated consumer fraud statutes in New Jersey and all other states and the District of Columbia through false and misleading advertising practices involving Vick’s DayQuil Cold and Flu Symptom Relief Plus Vitamin C and Vick’s NyQuil Cold and Flu Symptom Relief Plus Vitamin C.
The court initially held that the plaintiffs, residents of New Jersey, lacked standing to pursue any claims under any state consumer protection statute other than that of New Jersey. Next, the court agreed with Procter & Gamble’s contention that despite presenting their cause of action in the form of a claim under the consumer protection statutes of New Jersey and other states, the plaintiffs’ cause of action was in actuality an improper attempt to assert a private right of action under the FDCA. Finally, the court held that even if it were to assume the plaintiff’s claims were not an improper attempt to assert a private right of action under the FDCA, the plaintiff’s claims merited dismissal as the alleged no actual injury, failed to allege causation, and otherwise failed to assert other essential elements of the individual state consumer law causes of action. The court, holding that the plaintiffs had ample opportunity to amend their complaint on notice of Procter & Gamble’s positions and failed to address the pleading deficiencies in their amended complaint, ultimately found that dismissal with prejudice was warranted.
SAVE THE DATE FOR THE ABA'S FOOD & SUPPLEMENTS FIRST ANNUAL WORKSHOP AT COCA-COLA IN ATLANTA THIS WINTER
Thursday, February 17, 2011 - Hosted by The Coca-Cola Company.
Please save the date for this first annual one-day CLE workshop sponsored by ABA’s Food and Supplements subcommittee that will include panels on the impact of federal statutory and regulatory reform on the food industry, state consumer laws and consumer class actions related to food packaging, labeling, and marketing, the evolving science of food safety and technology, ethical considerations in the labeling of bioactive foods, and in-house counsel's top predictions for the future of food regulation and litigation. Leslie M. Turner, General Counsel for Coca-Cola North America, will speak on "Protecting the Brand in the Food Industry" at our networking luncheon and a networking reception will follow the workshop.
Ricardo Carvajal from Hyman Phelps & McNamara and I will be moderating the panel on the impact of federal statutory and regulatory reform on the food industry.
More information and a full program agenda to come. Stay tuned.
Food Liability Blog Included Among Initial Nominees for LexisNexis Top 25 Business Law Blogs
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