UCL Class Actions in California Expand Beyond "All Natural" Claims

The “All Natural” class action litigation in California has continued into 2012, as expected.  The claims in California are being filed under California’s consumer-friendly unfair competition law (or UCL), which is codified in sections 17200 and 17500 of the California Business & Professions Code, and the Consumer Legal Remedies Act (CLRA).

Given the costs and risks associated with UCL and CLRA class actions, many companies are getting pro-active and are carefully analyzing their labels.  The challenge for such companies, however, is that these lawsuits are not limited to labels that contain the words “All Natural.”  They fall into several broad categories.

 

First, there has been litigation over products that are marketed as being healthy but contain allegedly unhealthy ingredients, such as trans fat, saturated fat, high-fructose corn syrup or sugar.  Consumer protection class actions may also arise like a claim for a defective product-- where an otherwise healthy product experiences a manufacturing, packaging or storage deviation that takes its ingredients outside of the representations made on the label and subjects the manufacturer to litigation over “deceptive labeling” practices.

   

Second, there has been litigation over products that claim to be “All Natural” or “100% Natural” that allegedly contain GMOs or other synthetic or artificial ingredients.  The types of ingredients that have been challenged by plaintiffs include:

 

alkalized cocoa

ascorbic acid (vitamin C)

beta-carotene (vitamin A)

calcium pantothenate (vitamin B5)

cyanocobalamin

dutch cocoa

folic acid (a B vitamin)

glycerine

GMOs

inulin

niacinamide

potassium carbonate

pyridoxine hydrochloride

riboflavin

sodium benzoate

sodium citrate

soy proteins (from hexane)

xanthan gum

zinc oxide

        

Of course, many of these ingredients are used frequently in products and there is no evidence that they are harmful.  But given the California Supreme Court’s recent finding that “labels matter” (as opposed to product quality), plaintiffs are seizing on the opportunity to claim that something that has been processed or contains any “artificial” ingredient cannot possibly be “All Natural.” 

 

Third, there has been litigation over claims about the quality of ingredients, such as “100% Pure” claims on orange juice or coconut water labels.

 

Finally, there has been litigation over products that have unsubstantiated health benefit claims, such as “proven to reduce cholesterol,” “supports digestion, . . . metabolism, . . .[and] liver function,” “supports immunity,” “reduces risk of chronic diseases,” “promotes healthy joints,” or otherwise.

 

In the current environment (with the lack of guidance from FDA and various court rulings that have struck down motions to dismiss), companies cannot afford to ignore the risk of litigation.  The important thing for companies to take away from the morphing UCL class action litigation in California is that a cursory review of product labels is no longer enough to help ensure loss prevention.  The product, whether labeled “All Natural” or not, should be reviewed carefully as the litigation theories in California broaden.  Indeed, as noted above, many of the class action lawsuits in California involve claims other than “All Natural.”  Companies should conduct an intensive review of product ingredients (and consider testing) to ensure compliance with labeling regulations and to assess whether the ingredients and labeling claims are likely to result in unwanted attraction from the plaintiffs’ bar.   

 

For more information on this topic, contact Melissa Jones and Tom Woods in the litigation department of the firm’s Sacramento office.

Bad Guys Disguised As Good Guys: Labeling and Sourcing Issues at Farmers Markets

One of the first scenes in IFC’s comedy “Portlandia’ involves a couple asking their waitress for the provenance of the chicken they are considering ordering. She comes back with a photograph of “Colin”, the actual chicken, and describes the conditions under which he lived before he died for their meal. Unsatisfied with her answer, they ask her to hold their table while they drive 30 miles to the farm where Colin was raised. Five years later, they reappear (their waitress still holding their table) and decide they’d prefer not to have the chicken.

I thought of that as I read Jim Prevor’s report for The Perishable Pundit on “Farmers Market Fraud”, which included a follow-up as well.  Without question, farmers markets are opening rapidly all over, and it is not particularly surprising that some of the participants are not following the rules, leaving the honest participants with a bad name and consumers with legitimate concern that they are not getting what they bargained for in their farmers market experience. Apparently, similar research in Detroit indicated the same pattern as in Los Angeles.

 

In the spirit of the kind of people parodied on “Portlandia,” weren’t these supposed to be the good guys?

 

As it happens, I am related (by marriage, but we are far closer friends than the degree of relation) to Jennie Schacht, the author of the award-winning “Farmers Market Desserts.” In researching her book, Jennie visited farmers markets all over the country, and, she tells me, “I never had a producer refuse a visit to their farm and what I saw every place I visited, around the country, appeared authentic. (I didn't verify pesticide levels or other claims.).” For her work, of course, she needed to take the steps that Fred and Carrie parodied on “Portlandia.” What is the ordinary, non-cookbook author, non-obsessed consumer to do?

 

California is considering steps to deal with this issue, including raising the fees charged to farmers market participants from 60 cents to four dollars per market day, in order to increase the number of inspectors. One critic of the raised fee contends that dollars will not necessarily increase expertise. While Jennie Schacht suggests getting to know your producer can help, one of the letter writers to the Perishable Pundit notes that Bernie Madoff looked all his victims in the eye as well. 

 

In the end, I think the best regulation would occur by self-policing. This is not some free market solution, but rather a recognition that every honest seller in the marketplace has an incentive to weed out the bad apples, in this case sometimes literally. I recognize that farmers who attend farmers markets have a lot to do in the course of a day, and policing their neighbors’ stalls isn’t on their agendas. Market managers have a lot of work to do as well. But it is the honest farmer who will lose most if the reputation of farmers markets in general are diminished. 

 

Other, of course, than someone like me, who is already in mourning because the last of the year’s organic carrots have disappeared from the Ballard Farmers Market.

FTC Green Guides, Sustainability & Third Party Certification

Our previous blog entry discusses last week's release of the Federal Trade Commission's ("FTC") revised, proposed "Green Guides" generally, discussing how the FTC is focused on "deception" and is not taking a radical departure from the 1998 version (the last version) of the Green Guides. But under the new Guides what are the consequences of the FTC's position on sustainability and third-party certification, especially as it relates to food products? The bottom line is that marketers of sustainable food products should re-evaluate (1) what sustainability claims are made and (2) the benefits of proper third-party certification.

The FTC, in its commentary to the revised, proposed Green Guides, reports that it "is unable to provide specific advice on sustainable as an environmental marketing claim. Unlike other claims we tested, the term contains no cue alerting consumers that it refers to the environment."

Yet the FTC acknowledges that sellers of food (and non-food) products are using the term “sustainable,” and consumer awareness of sustainability issues is growing rapidly. The FTC seems to be leaving itself room for action against marketers of "sustainable" products if it’s clear that consumers are meant to believe that “sustainable” is an environmental marketing claim. And, as discussed in our previous entry, marketers need to be wary of compliance with not only the FTC but also state consumer protection laws, which often reach further than federal law on the marketing of food products.

FTC has also chosen for the first time to address in the Green Guides what it calls "Certifications and Seals of Approval." FTC makes clear that "It is deceptive to misrepresent, directly or by implication, that a product, package, or service has been endorsed or certified by an independent third-party." And, even
"third-party certification does not eliminate a marketer’s obligation to ensure that it has
substantiation for all claims reasonably communicated by the certification."

Food manufacturers and retailers who use a seal or logo to designate sustainability should evaluate whether the seal or logo could be read by the FTC, a consumer or a plaintiff’s lawyer to imply third-party certification or endorsement. In other words, if independent third-party certification isn't used, you should ask yourself the following questions:

  1. Is it clear to anybody reading your label (FTC, consumers, plaintiffs, bar, etc.) that the claim is only your claim and not a third-party claim?
  2. Do you have substantiation (i.e., science) to back up any claims of environmental sustainability (whether yours or a third party’s)?

If you as a food manufacturer or seller can't answer both questions affirmatively, your marketing may be a liability. The SC Johnson Company, for example, is the subject of a consumer class action alleging that the company's own "greenlist" certification program was deceptive. Often, the realistic choice may be a) not to market the product as environmentally sustainable or b) to switch to a substantiated third-party certification.

For food, your best choice may be Food Alliance certification, which is now the most comprehensive certification for sustainable food and the gold standard.*

*In the interests of full disclosure, I serve on the non-profit Board of Directors for Food Alliance and am a staunch advocate of the organization.

Court to Rule on Consumers' Expectations For Organic Cosmetics

Dr. Bronner’s Magic Soaps (“Dr. Bronner’s”) received a favorable ruling recently in its suit against competitors that it believes are misleading consumers by labeling cosmetic products as “Organic”. Part of Dr. Bronner’s claim appears to be that “Organic” standards established by the U.S. Department of Agriculture (“USDA”) set the bar for consumer expectations of "Organic" cosmetic products. The USDA’s National Organic Program (“NOP”) standards, according to the USDA, do not apply to “cosmetics, body care, or personal care products”.  Dr. Bronner’s argues in its complaint that “[p]ersonal care products labeled as in compliance with ‘Organic’ or ‘Made with Organic [up to three specified ingredients]’ under the NOP criteria reflect basic organic consumer expectations . . . .” (Brackets in original.)

Last week, a California Superior Court in San Francisco overruled the demurrer of Ecocert France (SAS) and Ecocert, Inc. A demurrer is essentially a request made to a court, asking it to dismiss a lawsuit on the grounds that no legal claim is asserted.

According to Dr. Bronner’s, the “Court turned aside the defendants’ arguments that Dr. Bronner’s, in its complaint filed with the Court, had not sufficiently spelled out how actual consumers, the company and competition in the organic personal care industry have been hurt by the defendants’ deceptive practices.” The court’s ruling does not necessarily mean that Dr. Bronner’s is likely to succeed, only that it has articulated colorable claims. The court did not rule on the merits of these claims.

This case should be watched closely by those in cosmetics and food industries. Dr. Bronner’s claims turn, at least in part, on its view of “consumer expectations.” Do consumers have expectations as to what “Organic” means? Does it mean something different for cosmetic products? These are just a few of the significant questions that may be addressed in the litigation.

More on The Raw Milk Debate - Consumer Choice vs. Consumer Protection

Recently discussed on this site was how the raw milk debate is in many ways ground zero for the debate between consumer protection and consumer choice. The Seattle Post Intelligencer ran an interesting piece today focusing on just that debate.

I found comments attributed in the article to Kansas State professor Doug Powell most salient:
Doug Powell says he's not surprised that government health officials denounce the dangers of raw milk then turn around and license the sale of the same milk.
"In part, it's because of the almost evangelical way people talk about raw milk and that America is founded on consumer choice," said the associate professor of food safety at Kansas State University.
"The numbers of illnesses from outbreaks caused by unpasteurized milk are not that high. You could very easily make the cases that 'Wow, maybe tomatoes should be regulated a whole lot more than we do now because the numbers of cases of salmonella saintpaul are up to 550 now,' " said Powell, who is also scientific director for the International Food Safety Network.
While I'm not sure I agree that "America is founded on consumer choice," professor Powell is surely right that the conflict between consumer choice and consumer protection is bringing raw milk to boil. Professor Powell is also correct that from a public health standpoint, fresh produce presents a greater and more certain danger.

Implicit in the Post-Intelligencer article is that the debate suffers from a lack of consumer information. For example, do we really understand the alleged benefits of raw milk? There is some information on the web but is this peer-reviewed information that consumers can trust? On the flip side, consumers should be given better information than the kind of "scared straight" quality of information currently available. Both those who advocate against raw milk and those who support it can surely agree that both would be served by better research and consumer information.


Preemption of Organic Foods Claims

We recently published a client alert about the claims being asserted against retailers for selling as “organic” milk that some believe may not be organic, as defined under the Organic Foods Production Act of 1990 A prime issue in this litigation is preemption. Claims are asserted not under federal law, but under state consumer protection statutes.