You'll remember the scene from "Casablanca." Ilse (Ingrid Bergman) comes in and Rick (Humphrey Bogart) says, "Your unexpected visit isn't connected by any chance with the letters of transit. It seems as long as I have those letters, I'll never be lonely." That's sort of how I feel about "all natural" product labeling litigation. So long as those cases exist, perhaps I'll never be lonely. But will they always exist? The latest decision in our old friend, Astiana v. Ben & Jerry's Homemade, Inc., provides me with some optimism I might be lonely again.
As you'll recall from our post when this case was first filed, the plaintiff was upset because, she claimed, dutched cocoa was somehow an artificial product. We pooh-poohed that notion, but, presumably for reasons of judicial economy, Ben & Jerry's chose to settle the case.
In the meantime, though, the Ninth Circuit Court of Appeals decided Dennis v. Kellogg Co., which greatly restricted the terms under which settlements of similar cases could be approved. In particular, the case limited the use of the cy pres doctrine, which would dispose of unexpended settlement funds, to charities that benefit the same goals as the unrepresented and unfound members of the plaintiff class. The court said,
Thus, appropriate cy pres recipients are not charities that feed the needy, but organizations dedicated to protecting consumers from, or redressing injuries caused by, false advertising. On the face of the settlement's language, "charities that provide food for the indigent" may not serve a single person within the plaintiff class of purchasers of [the allegedly offending product].
Dennis was decided by the Ninth Circuit literally between the time the court in Astiana had preliminarily approved the class settlement and the date of the hearing on final approval. The court, cognizant of the decision, asked the parties to go back and revise their settlement to one that could be approved in light of Dennis. This they were unable to do, and the settlement collapsed. The plaintiffs then moved to certify the class. And got pounded by the court. After the jump, you'll see how.
We're written a lot about class actions before. In particular, this article by Melissa Jones outlines the issues in California well. In Astiana, the court focused on two related issues needed to certify a class, "ascertainability" and "predominance of common questions". The court found that the plaintiffs had made no showing on either issue. The claim had been that alkalized cocoa was not "all natural." Evidence after discovery showed that the cocoa in Ben & Jerry's ice cream had been dutched using different alkalis, some of which were unquestionably "natural" and some of which were arguably "synthetic". Neither Ben & Jerry's nor its cocoa vendors kept track of what ice cream contained which cocoa, and federal law does not require them to do so. Since the only class members were those who had purchased cocoa dutched using synthetic alkali, it was impossible to ascertain who was a member of the class and who was not.
The issue of "predominance of common questions" in this case focused almost entirely on damages. And here is where Ben & Jerry's experts provided evidence that might start crumbling the walls of these "all natural" cases. Ben & Jerry's, after all, had taken the words "all natural" off their labels (replacing it with a more prominent display of the slogan "Vermont's Finest"), and thus had evidence of the impact the change had had on their sales, which was effectively none at all. The plaintiff, on the other hand, basically had no evidence supporting her claim that there was a market price difference between an ice cream labeled "all natural" and one that was not.
What did she claim? Here is the quote from the decision:
Defendant also notes that plaintiff complains about her "vibe" being "disrupted" upon learning from class counsel that Ben & Jerry's might have used a "synthetic" alkali, but that she provides no evidence that other consumers shared this view.
Since the last Gratetful Dead concert (July 9, 1995 at Soldier Field, Chicago), it's not as easy as it once was to identify a class of people who share the same vibes, disrupted or undisrupted. In any event, the court wasn't going to let the plaintiff channel the vibes of others. What the court was looking for was more in the way of evidence of a common theory of damages, i.e., evidence exactly like the evidence in Ben & Jerry's studies on consumer behavior, only coming to the exact opposite conclusion. The plaintiff had nothing:
Plaintiff has not offered any expert testimony demonstrating that the market price of Ben & Jerry's ice cream with the "all natural" designation was higher than the market price of Ben & Jerry's without the "all natural" designation. Thus, by definition, there is no evidence showing how much higher the price of one was than the other. More importantly, plaintiff has not offered any expert testimony demonstrating a gap between the market price of Ben & Jerry's "all natural" ice cream and the price it purportedly should have sold for if it had not been labeled "all natural" – or any evidence demonstrating that consumers would be willing to pay a premium for "all natural" ice cream that was made with cocoa alkalized with a "natural" alkali, and did in fact pay such a premium.
The plaintiff's utter failure to come forth with a theory of damages was fatal to class certification. And of course, the lack of class certification is practically fatal to plaintiff's case. Even to win as a non-class action, plaintiff will still need to identify both her quantity of purchases of Ben & Jerry's products, prove which ones had cocoa dutched with the allegedly unnatural alkali, and then demonstrate some difference between the price she paid and the price if her vibe had not been disrupted. Even with statutes that can also pay attorneys' fees, it's hard to see how anyone would bring such an action.
The combination of Dennis and Ben & Jerry's market studies for Astiana may finally start to turn the tide against these cases. The application of the cy pres doctrine as required in the Ninth Circuit by Dennis leaves the parties with a dilemma they seemed to have found a way around before that case was decided. The plaintiffs' bar would of course love for the unclaimed funds to go to an organization that can help bring the next “all natural case”. The defendants, naturally, would prefer not to arm the opposition. Before Dennis, the plaintiffs’ bar and the food industry had reached a détente, where the unclaimed funds would go to "good works" organizations. The plaintiffs' bar needed to have the settlements of a certain size to justify their fees. Giving food to the homeless, particularly giving food the defendants already have on hand, was nearly costless to the defendants. Dennis now bars that way, which will be a significant impediment to easy settlements.
One might not want to make too much of the Ben & Jerry's market studies, unless one is Ben & Jerry's. They focused on that specific brand of ice cream, a brand that a large number of consumers have purchased and will continue to purchase based on general satisfaction with the brand and the values it has long stood for. So long as the ice cream appears to taste the same, consumers are not likely to abandon it because it no longer says "all natural", as the studies show. But that doesn't mean that a less established product will have the same market acceptance without an “all natural” label. So maybe I won’t be lonely after all.
Our colleagues at the California Environmental Law Blog note the General Industrial Storm Water Permit is slated for adoption on April 1, 2014. Everyone in the California food industry from owners of feedlots to operators of manufacturing facilities will find this very important and should follow developments as Ryan Waterman and Missy Foster report on them.
Recently, there have been both positive and negative developments in California regarding "All Natural" consumer class action litigation. By way of background, these cases are typically brought under California's Unfair Competition Law (Bus. & Prof. Code §17200), False Advertising Law (Bus. & Prof. Code § 17500) and Consumer Legal Remedies Act (Civ. Code §1750) regarding alleged false and misleading labels on food and beverage products.
Plaintiffs have begun to expand the focus of this litigation into new industries, including cosmetics, personal care products, and home cleaning supplies. The list of challenged ingredients also continues to expand. Additionally, some plaintiffs are pursuing claims simply where the product label contains the term "natural," even if it did not state "100% Natural” or "All Natural.”
On the other hand, there have been a handful of recent court decisions demonstrating that a motion to dismiss these consumer class actions can succeed, including under the “reasonable consumer” test, the primary jurisdiction doctrine and standing. This is a positive trend in California, given that in many earlier cases courts routinely denied motions to dismiss, leaving defendants with two bad options—further litigation or costly settlement.
For more information on this topic, including a list of the ingredients often challenged in these lawsuits, see my article, "All Natural: Label Making: Are You a Class Action Target in California."
California federal courts now appear positioned to lead the way nationally on the issue of whether food products containing genetically modified ingredients, commonly referred to as “GMOs” can be labeled “All Natural.” Just last week a federal judge in Colorado stayed the case of Nicole Van Atta v. General Mills, Inc. (Case No. 12-cv-02815-MSK-MJW) (PDF), pending the Food and Drug Administration’s (FDA) input on this very issue recently sought from the agency by a California judge in the case of Cox v. Gruma Corp. (Case No. 12-CV-6502 YGR) (PDF).
California, a hotbed of consumer litigation activity due to the state’s expansive consumer protection laws, has become a particularly common venue for consumer class actions alleging misbranding and false advertising regarding the use of “All Natural” claims. In particular, many cases have been filed challenging a manufacturer or retailer’s use of “All Natural” labels on products containing GMOs. These lawsuits are typically brought under California’s unfair competition and false advertising laws (referred to as the “UCL” and “FAL” or §§ 17200 and 17500 of the California Business and Professions Code).
Cox v. Gruma Corp. (“Cox”), the case that lead to the Colorado court’s stay, is a class action lawsuit filed in December 2012 in U.S. District Court for the Northern District of California against Gruma Corporation, the manufacturer of Mission® Tortilla chips. The complaint in Cox alleges that the product’s labeling is false and misleading because it claims to be “All Natural” when it is not in fact natural due to the involvement of genetically modified corn seed in the product’s manufacture.
In Cox, U.S. District Judge Yvonne Gonzalez Rogers issued a final order dated July 11, 2013 (PDF) that stayed the class action for six months and referred to the FDA for an administrative determination the precise question of whether a food product containing GMO ingredients may be labeled “All Natural.” In making her decision, Judge Rogers agreed with plaintiffs’ argument that “a gaping hole in the current regulatory landscape for ‘natural’ claims and GMOs” exists. Accordingly, relying on the primary jurisdiction doctrine, Judge Rogers explained that a court may stay proceedings or even dismiss a complaint without prejudice where the claims involve “an issue of first impression or a particularly complicated issue Congress has committed to a regulatory agency.” Clark v. Time Warner Cable, 523 F. 3d 1110, 1114 (9th Cir. 2008). Based on the nature of the claims in this lawsuit, Judge Rogers concluded that “[u]nder these circumstances, deference to the FDA’s regulatory authority is the appropriate course.”
Many, including the plaintiffs, were surprised by this order based on the fact that, more recently, judges handling similar cases in California have refused to apply the primary jurisdiction doctrine to dismiss or stay matters. The plaintiffs object to the stay order. They argue that FDA has repeatedly declined to define the term “natural” when asked to do so, and there is no reason to suspect it should address the issue now differently now. Specifically, in 2010, a New Jersey federal court judge stayed a food-labeling suit against Hornell Brewing Co. Inc. and ordered FDA to address whether products that contain high-fructose corn syrup may be labeled “natural.” In a September 2010 letter responding to the court (PDF), Michael Landa, Acting Director of Center for Food Safety and Applied Nutrition (CFSAN) at the time, wrote that FDA was declining to provide such a determination.
It is unclear how FDA will respond to the recent order issued in Cox v. Gruma Corp., however, it is undeniable that there is mounting pressure on the agency to act. Although the Cox plaintiffs are correct that FDA has declined to issue formal rules concerning what is and is not “natural,” courts appear to recognize that something this time “feels” different. Perhaps this is because FDA and courts are undeniably more cognizant of the need for resolution of this issue in the context of GMO-containing products given voter interest on the issue throughout 2012, recent Congressional pressure in the form of letters to the agency requesting action on GMO labeling, and several court orders now staying litigation specifically on the issue of whether GMO-containing foods can be labeled “All Natural.”
While it is not expected that the FDA will issue a formal rule in response to recent court orders, it is expected that FDA will respond in some form six months from now in a manner that will tell us whether it will, or will not, issue formal rules or updated guidance on this issue in the reasonably near future. For certain, it will be interesting to see how the Court in Cox formally deals with this issue six months from now and how that case impacts litigation throughout the country.
Stoel Rives attorneys will continue to track this case and other similar “All Natural” cases as developments occur. Check back here for updates.
Tomorrow, California voters will be asked to decide the fate of Proposition 37, a voter initiative that would require certain raw and processed foods that have or may have been “entirely or partially produced with genetic engineering” to be labeled as such, if sold in California. Proposition 37 contains a number of exemptions from the labeling requirement. Specifically, if passed, the following foods would be not be required to comply with the mandatory labeling provisions of the initiative:
- certified organic products;
- alcoholic beverages;
- medical foods;
- food sold for immediate consumption, such as in a restaurants;
- products unintentionally produced with genetically engineered material;
- food made from animals fed or injected with genetically engineered material but not genetically engineered themselves; and
- food processed with or containing only small amounts of genetically engineered ingredients.
Initially, Proposition 37 was supported by more than two-thirds of Californians who said they intended to vote on November 6, according to a poll from the California Business Roundtable and Pepperdine University’s School of Public Policy. On October 30, however, their latest poll indicated that support had dropped to approximately 39% and opposition had increased to almost 51 percent.
In addition to being the center of heated debate here in the U.S. over the past several months, the initiative has also received international attention. A recent article in The Guardian noted that “California’s ballot initiatives often take on huge importance. Often they are seen as laboratories for new ideas, that are adopted later in the rest of the country.”
Stoel Rives attorneys will be watching the outcome of the polls in California and will report on the results later this week.
Recently, I attended the annual American Agricultural Law Association (AALA) Conference in Nashville, TN. A topic on many of the attendees’ minds was California’s Proposition 37 or “The California Right to Know Genetically Engineered Food Act.” A previous discussion of Proposition 37 can be found here.
If passed in November, the voter initiative would require certain raw and processed foods that have or may have been “entirely or partially produced with genetic engineering” to be labeled as such. In addition, Subsection 110809.1 provides that if a food is “genetically engineered” or “processed” as those terms are defined under the initiative, the food’s label may not, in California, state or imply that the food is “natural,” “naturally made,” “naturally grown,” “all natural,” or use any words of similar import that might mislead any consumer.
As election day nears, the debate over Proposition 37 has reached fever pitch. Proponents of the initiative urge that consumers are entitled to make informed choices about the foods they purchase. On the other hand, opponents argue that the initiative would be burdensome on both producers and retailers and would result in excessive litigation.
While attending the AALA Conference, I had the pleasure of chatting with Drew Kershen, the Earl Sneed Centennial Professor of Law (Emeritus) at the University of Oklahoma College of Law. Professor Kershen recently published an article on a unique and important issue involving California’s Proposition 37. The article addresses whether Proposition 37 complies with World Trade Organization (WTO) Agreements and discusses the compatibility between the two.
In analyzing the relationship between Proposition 37 and WTO Agreements, more specifically the Agreement on the Application of Sanitary and Phytosanitary Measures (the SPS Agreement) and the Agreement on Technical Barriers to Trade (the TBT Agreement), Professor Kershen concludes that the initiative “raises significant and difficult questions about whether it complies with the SPS Agreement or the TBT Agreement.” As a result, he notes that Proposition 37 can be challenged by member states to the WTO Agreements as well as the United States as a violation of WTO Agreements. However, it remains unclear as to whether those parties will act against Proposition 37.
Professor Kershen’s essay is a reduced version of a previously published article: “Would State-Mandate Labels for Biotech Foods Violate World Trade Agreements?,” Critical Legal Issues WORKING PAPER No. 181 (Wash. Lgl. Fndt., Sept. 2012), available at www.wlf.org/.
Stoel Rives attorneys continue to track the progress of Proposition 37 in California. Stay tuned for more updates as election day approaches.
Attorneys Lee N. Smith and Melissa A. Jones participated in the GMA 2012 Food Claims and Litigation Conference in Dana Point. Mr. Smith (his real name) spoke on the effect of the New Food Safety Modernization Act and its potential impact on litigation, and Ms. Jones (her real name) and Mr. Smith also presented an overview of Proposition 65 and recent developments with particular regard to food products.
How FSMA May effect Litigation
It was our premise that FSMA will affect litigation in two main areas. One related to the threshold standards under the statute, which have yet to be defined in detail by law or regulation and two, related to the potential increase in government actions under those standards and the commensurate increase in related plaintiff litigation.
The areas under FSMA that have similar thresholds are those that trigger recalls (Sec. 206) , reporting to the food registry (Sec. 211), deregistration (Sec 102), additional record review (Sec.101) and finally those that may trigger administrative detentions (Sec. 207). The first four sections are triggered by the reasonable probability standard, which is usually taken to be mean more than 50% or more probable than not; which is a low standard to trigger recalls or reporting. The other standard for detention is “A reason to believe” food is “adulterated or misbranded.” for administrative detentions." We believe that these standards will trigger litigation similar to the Del Monte Fresh litigation where industry challenged the FDA's lack of evidence available to require a detention and recall.
With respect to Prop 65 we discussed the Prop 65 listing process, and recent case law California Chamber of Commerce v. Schwarzenegger et al., 196 Cal. App 4th, 233 (2011) that supports listing that comes directly from listing made under the labor code.
We identified a recent preemption case that found that the regulation of poultry did not in fact pre-empt prop 65 (see Physicians Comm. for Responsible Med. v. McDonald’s Corp., 187 Cal. App. 4th 554 (2010) (federal Poultry Products Inspection Act did not preempt Prop 65 warnings) and discussed the naturally occurring defense under Prop 65 which is difficult and can costly to prove.
We also noted a recent sixty day notice for MEI; which was just listed last year. The chemical 4-MEI is a fermentation byproduct in certain food products including caramel coloring, soy sauce, Worcestershire sauce, wine and ammoniated molasses, as well as ammoniated livestock feed. The chemical is used in the manufacture of pharmaceuticals, photographic chemicals, dyes and pigments, cleaning and agricultural chemicals, and rubber. First Sixty Notice to grocers in Feb. 2012 as to carbonate soft drinks with caramel coloring.
We mentioned the recent listing of Sulphur Dioxide and the current dispute over safe levels. SO2 is a colorless, nonflammable gas with a pungent odor. As a component of ambient air pollution, SO2 is found in combination with sulfuric acid, sulfur trioxide, ozone, nitrogen dioxide, and particulates, and its presence in ambient air occurs primarily as a result of fossil fuel consumption at power generation and other industrial facilities
• Used in many food products as a preservative including on Cherries and Raisins.
• Should have been listed as an inhalant hazard only.
Please contact us if you have any questions.
The Department of Toxic Substances Control (DTSC) released new informal draft regulations whose stated purpose is: "to make safer consumer products ....widespread in California...[and].... provide more protection against toxic chemicals in products on store shelves, while creating market opportunities for industry."
The draft released on October 31, 2011, creates regulations identifying consumer products that contain toxic chemicals. The DTSC claims it will use a science-based process that requires the identification of toxic ingredients and the analysis of alternatives to that ingredient. Based on the results of the analysis, removal of the toxic ingredient and/or posting product information may take place.
The DTSC’s draft regulations encompassed the following:
1) The regulations establish a list of Chemicals of Concern (~3,000) based on the work already done by other authoritative organizations. The rules also allow DTSC to identify additional chemicals as Chemicals of Concern.
2) The regulations require DTSC to develop a list of “Priority Products” that contain Chemicals of Concern for which an alternative assessment must be conducted.
3) The regulations require responsible entities (manufacturers, importers, and retailers) to notify DTSC when their product is listed as a Priority Product. DTSC will post this information on its website. Manufacturers (or other responsible entities) for a product listed as a Priority Product must perform an alternatives assessment (AA) for the product and the Chemicals of Concern in the product to determine how to limit potential exposures or the level of potential adverse public health and environmental impacts posed by the Chemical of Concern in the product.
4) The regulations require DTSC to identify and impose regulatory responses to effectively limit potential adverse public health and/or environmental impacts posed by the Priority Product/Chemical of Concern (if the manufacturer decides to retain the Priority Product), or the potential adverse impacts posed by the alternative chemical/product selected to replace the Priority Product.
A prior proposed set of regulations were introduced in 2010, but additional time was required to refine the concepts. The version released in October greatly shortens timeframes, immediately establishes a list of chemicals of concern, and is intended to stimulate a change in the way products are created by incorporating impacts to health and the environment into the design phase. The regulations will be discussed by DTSC’s Green Ribbon Science Panel on November 14-15 in Sacramento.
Consumer class action plaintiffs remain very active in California, with cases continuing to be filed against food manufacturers and suppliers regarding alleged misleading labeling and marketing claims. Just this week, plaintiffs filed a class action lawsuit against Trader Joe’s alleging that it falsely advertised and sold cookies and apple juice as “All-Natural” even though the products contained synthetic ingredients. In the past few months alone, several other large companies have been sued over allegedly false “All Natural” claims in lawsuits involving ice cream, juice, granolas, energy bars, and cereal. In the same time period, other class actions have been filed in California regarding the marketing of products that are made from genetically modified plants and grains, such as cooking oil.
These actions are most commonly brought under California’s unfair competition law (referred to as the “UCL” or § 17200 of the California Business and Professions Code). The problem for companies sued under California’s UCL is that it is difficult to get claims dismissed at an early stage. Lawsuits frequently survive the pleading stage because claims are evaluated from a subjective, and not objective, standard. Cases are allowed to proceed even though only one plaintiff establishes standing to sue by showing they actually relied on a company’s statement. Finally, preemption defenses are frequently inapplicable.
Companies should get proactive in light of this litigation trend, which isn’t going away, and examine their labels to minimize the risk of litigation. Those that have been sued should consider creative ways to address these class actions by developing and preserving constitutional challenges. Despite recent California cases making it easier for plaintiffs to maintain their lawsuits at an early stage, aggressive discovery may prevent plaintiffs from certifying the proposed class.
The Industry Acrylamide Coalition (Coalition) filed suit against the State of California Office of Environmental Health Hazard Assessment (OEHHA), the agency that manages and revised the Prop 65 list to include 4-metheylimidazole (4-MEI), as a carcinogen. 4-MEI is often found in cooked foods. The Coalition argues that the third party report on which the listing was based, from the National Toxicity Program (NTP), is insufficient to support a valid Prop 65 listing. The complaint, which was filed in Sacramento, alleges that OEHHA failed to consider the entire file of evidence before making its decision. The Coalition’s complaint also indicates that 4-MEI is created during normal cooking of food and ingredients and cannot easily be removed. The Coalition includes the American Beverage Association, the California League of Food Processors, and the Grocery Manufacturers Association of USA.
Acrylamide – In Your Coffee?
In a similar manner, the National Coffee Association is coordinating the joint defense of a number of coffee roasters and retailers with respect to a 60-day notice served on 40 roasters. The chemical at issue is acrylamide, which is formed when certain proteins are heated. Original scrutiny for this chemical concentrated on potato products such as french fries, but apparently the same chemical reaction occurs in coffee when it is roasted. In addition, other beverages that also contain caffeine, such as soft and energy drinks, have also received 60-day notices.
Dietary Supplements and Prop. 65
A dietary supplement company has been ordered to pay 2.65 million as part of a joint settlement with district attorneys in California. This is one of the larger suits filed and settled by a public enforcement entity, other than the California Attorney General. People v. Irwin Naturals, Inc., Orange County Superior Court, Case No. 30-2011-00445453.
Irwin Naturals was alleged to have made false and misleading representations with respect to the marketing and sales of its products. The products were advertised as having Hoodia Gordonii, an alleged appetite suppressant; however, lab results found that the chemical was not present and triggered a mislabeling suit. Additionally, the suit alleged that many of the products also exceeded the Prop. 65 level of proposed Maximum Allowable Dose Level (“MADL”) of .5 micrograms/dA1. Most of the indicated products were green tea products, sold without the Prop. 65 warning as required.
As part of the settlement, 1.95M in penalties were paid to help enforce state consumer protection laws, $100,000 in restitution, and $600,000 in set aside for investigation costs. Reportedly, prosecutors felt that this prosecution was necessary in part because the FDA does not regulate dietary supplements.
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.
Amidst rising incidences of hospitalizations in college and teenage drinkers linked to consumption of alcoholic energy drinks, the Washington State Liquor Control Board banned their sale effective tomorrow, November 18, 2010. The move came on the heels of a request by Washington Governor Christine Gregoire, whose office stated in a November 10 press release that they were “…particularly concerned that these drinks tend to target young people.”
The Liquor Control Board placed the ban in an emergency ruling which will last for 120 days. During that time, the Liquor Control Board will move to make the ban permanent. Liquor Control Board Chairperson Sharon Foster stated, “[t]he Board is acting in the public safety…the Board is acting now to ensure these products do not contribute to a tragedy before the Food and Drug Administration or Legislature can act.” Earlier this year, the Liquor Control Board had lobbied for State legislative action to ban the sale of caffeinated malt beverages in Washington but those efforts were unsuccessful. A list of particular products affected by the Liquor Control Board’s ruling can be seen here.
Washington’s ban is merely the most recent action in an ever increasing movement by states to control the sale of caffeinated alcoholic beverages. The Oregon Liquor Control Commission Chairman stated in an October press release that, “…alcoholic energy drinks should be removed from the market until further research isdone.” The OLCC also stated that it is currently looking into possible regulatory efforts with the state legislature and is reaching out to community organizations to warn them of the dangers of the beverages.
While California’s Department of Alcoholic Beverage Control has not yet made a statement regarding the drinks, Connecticut announced Monday that it had reached agreements with state distributors to voluntarily stop shipments of caffeinated alcoholic beverages starting December 10, 2010. Michigan has banned one particular brand of caffeinated alcoholic beverage, Four Loko. New York has reached an agreement with Phusion Projects LLC, the manufacturer of Four Loko, to stop sales in the state until “…emerging science, regulatory developments or other relevant changes in circumstances arise." Utah and Oklahoma have followed Washington’s lead in banning the sale of any brands altogether. Massachusetts’ Alcoholic Beverage Control Commission stated that it will file an emergency ruling, similar to Washington’s, on Monday, November 22, 2010.
At the federal level, the Food and Drug Administration (“FDA”) is currently reviewing whether caffeine is a safe additive to alcoholic beverages. A negative finding would essentially ban the sale of caffeinated alcoholic beverages nationwide. It is widely assumed the FDA will, in fact, reach a negative finding. NY Senator Chuck Schumer, who has been lobbying for a ban on the drinks, stated that the FDA decision “…should be the nail in the coffin of these dangerous and toxic drinks.” The FDA decision is expected within the week.
Froot Loops pre-dated Crosby, Stills, Nash & Young. I remember taking the Kellogg's factory tour in Battle Creek and being handed an individual-sized packet at the end of the tour, even before they hit the market. I was seven years old, but I knew they were cereal not fruit. Apparently, some other people think otherwise.
Ken has already blogged about the related, and dismissed, Crunchberry lawsuit. At the ABA Business Law Section Spring Meeting last weekend, my friend Teresa Harmon Wilton mentioned the Crunchberry case in her annual round-up of commercial law cases, and mentioned that the decision was based on the prior Froot Loops case. I looked down at my Blackberry, and that's when I realized there was an old Froot Loops case but I had just got notice of a new one.
Two old ones, actually.
In 2007, the United States District Court for the Central District of California dismissed a claim against Kellogg USA for violations of various California statutes and common law causes of action based on the claim that Froot Loops do not contain fruit.
In 2009, the United States District Court for the Eastern District of California dismissed a claim against Kellogg USA for violations of various California statutes and common law causes of action based on the claim that Froot Loops do not contain fruit.
On April 19, a complaint was filed in the United States District Court for the Northern District of California against Kellogg USA for violations of various California statutes and common law causes of action based on the claim that Froot Loops do not contain fruit.
There is clearly a pattern here. I would note that there is only one other federal court district in California, the Southern District in San Diego. Unless I missed a case there.
In the McKinniss case, the court dismissed claims for:
- Violation of the California Unfair Competition Law
- Violation of the California False Advertising Law
- Violation of the California Consumer Legal Remedies Act
- Negligent Misrepresentation
- Breach of Express Warranty
- Unjust Enrichment
In the Videtto case, the court dismissed claims for:
- Violation of the California Unfair Competition Law
- Violation of the California False Advertising Law
- Violation of the California Consumer Legal Remedies Act
- Intentional Misrepresentation
- Breach of Implied Warranties
In the Werbel complaint, plaintiff seeks damages for:
- Violation of the California Unfair Competition Law
- Violation of the California False Advertising Law
- Violation of the California Consumer Legal Remedies Act
- Intentional Misrepresentation
- Breach of Implied Warranties
Each complaint referenced a study by the Strategic Alliance for Healthy Food and Activity Environments that found that foods it claimed suggested the presence of fruit did not in fact contain fruit. The courts have so far not cared much for this study, which doesn’t in any way demonstrate that anyone could be misled by the actual advertising on the package.
Raise your hand if you’re surprised at the fact that the same attorneys brought all three cases. Under our justice system, a plaintiff is not bound by the decision of a court to which he or she was not a party. An attorney is held to a different standard under Rule 11 of the Federal Rules of Civil Procedure. It will be interesting to see if there is anything that comes from expecting the same conditions to lead to a different outcome.
Ninth Circuit Approves California Ban on Slaughtering Nonambulatory Animals Against Preemption Challenge
Chief Judge Alex Kozinski of the Ninth Circuit Court of Appeals may be the best-known lower court judge in the United States. He has wide-ranging tastes and accomplishments. Nearly every lawyer has a favorite Judge Kozinski quote, such as the opening line in Mattel, Inc. v. MCA Records, Inc.: "If this were a sci-fi melodrama, it might be called Speech-Zilla meets Trademark Kong."
Today, Chief Judge Kozinski authored the opinion in National Meat Ass'n v. Brown, upholding California's statute rendering it illegal to slaughter non-ambulatory ("downer") animals against the claim the statute was preempted by the Federal Meat Inspection Act. The case specifically involved pigs, apparently because cattle in that condition must be labeled "U.S. Condemned" and disposed of outside the food supply.
The plaintiffs made two claims, one for express preemption and one for preemption by implication. The court was having none of it. With regard to express preemption, the statute expressly preempts state laws relating to "premises, facilities and operations." On the other hand, the statute expressly permitted state regulation of slaughterhouses. Two other circuit courts had reached the conclusion that regulating the kind of animal that may be slaughtered was not preempted. In his typical fashion, Chief Judge Kozinski said that the analysis in one case involving horse flesh "made horse sense." Then, in dealing with the district court's analysis about how a pig turns into pig meat no matter what its condition before slaughter, he wrote this one word rebuttal: "Hogwash."
In dealing with the implied preemption argument, the court concluded that it was physically possible to comply with both the FMIA and the California statute. Wrote Chief Judge Kozinski,
But these regulations don't require the slaughter of downer animals; no slaughterhouse operator would be fined by federal authorities if he gave nonambulatory animals medical care and put them up for adoption as pets.
And less flippantly:
Federal regulations require inspection if downer animals are to be slaughtered . . . . Whether they may be slaughtered is up to the states.
(emphasis original). The court similarly dismissed an argument that release of the animals to be euthanized would require permission from federal officials, because there was nothing in the record to suggest that this permission would not be routinely granted. Similarly, the claim that euthanized downer animals would need to be inspected by federal officials for disease was met with the fact that the California statute did not prohibit such inspection so long as the animals were not slaughtered for food.
One part of the California statute, Section 599f(e), which deals with the transportation of nonambultaory animals, was found to be preempted. This was because the federal statute expressly authorized certain means of moving downer animals that were prohibited under the California law. The court found, however, that no showing of irreparable harm had been demonstrated in the lower court, which was necessary to a preliminary injunction, and thus vacated the injunction in full, without prejudice to a later showing before the lower court of such irreparable harm on this one issue.
As pistachio recalls continue to be announced in the wake of salmonella-tainted pistachios from Setton Farms, two California lawmakers this week announced legislation that is expected to strengthen food-safety standards in that state.
The bill to be introduced in the California State Assembly by Assembly Speaker Karen Bass and Assemblyman Mike Feuer is expected to require detailed safety plans from food processors, periodic testing of food at California food processing facilities, and requirements for food processors to report to state authorities any positive tests for a dangerous contaminant within 24 hours.
A video of Assemblyman Mike Feuer’s announcement is available below. Meanwhile, the FDA continues to update its list of recalled products.
When Is Labeling Misleading and Actionable Under State Law? Is There Any Clearly Understood Standard?
A recent Ninth Circuit case again raises serious questions as to whether there are any clearly defined legal standards as to when a food label is misleading and when it’s not. Manufacturers who are in compliance with federal standards for labeling may still be liable under state law.
In Williams v. Gerber, the Ninth Circuit, reversing the district court, reinstated a putative class action that alleged labeling on “fruit juice snacks” (1) constituted misrepresentation and breach of warranty under California common law and (2) violated California’s statutes on unfair competition and consumer law. The district court had granted a motion to dismiss under Rule 12(b)(6), finding that statements on the label “were not likely to deceive a reasonable consumer, particularly given that the ingredient list was printed on the side of the box.”
Here’s the label in question:
In particular, the appellate court did not approve that the product, made of white grape juice, featured photographs of a variety of fruit on the label. The court also found misleading the statement that the product was made with “fruit juice and other all natural ingredients.” The product contained in addition to all-natural ingredients some ingredients the Ninth Circuit believed may not be “all natural.” The court believed that the statement, though not untruthful, should have disclosed more information.
Troubling in the court’s decision is that full nutritional and ingredient information was printed in similar size print on the same label. Even the court acknowledged that “reasonable consumers expect that the ingredient list contains more detailed information about the product . . . .” As a practical matter, the only way manufacturers can mitigate against these types of putative class actions is to involve lawyers directly in the marketing and labeling process. Under the world imagined in the Williams case, legal training seems to be a prerequisite to understanding which labels may give rise to litigation and which may not.
Yesterday, California became the first state in the Union to write into law menu labeling requirements. Like municipal ordinances recently enacted in New York City and Seattle, the California law requires certain “chain” restaurants to disclose nutritional information and calorie content information for certain items.
The law, to be phased in between 2009 and 2011, applies to restaurant chains with at least 20 locations that “offer for sale substantially the same menu items, or operates as a franchised outlet of a parent company . . . with the same name in the state that offer for sale substantially the same menu items.”
The new California law reads like a lawyer’s dream. Numerous exemptions are granted for certain grocery stores, “certified farmer’s markets” and others. Exemptions are also created to the exemptions. For example, “separately owned food facilities to which this section otherwise applies that are located in the grocery store” are not included in the “grocery store” exemption. To further add to the confusion, “grocery store” is defined to include convenience stores, though the law fails explain what that means. Does this mean that the law applies to a hamburger chain restaurant but not to the neighboring chain “convenience store” that sells the same hamburger but also a quart of milk? Does this make any sense? Won’t this statutue almost certainly generate significant litigation?
The labeling requirements apply to “standard menu items,” which are defined as “a food or beverage item offered for sale by a food facility through a menu, menu board, or display tag at least 180 days per calendar year . . . .” Yet a “standard menu item” does not include “a food item that is customized on a case-by-case basis in response to an unsolicited customer request.” What does "unsolicited customer request" mean? What about a sandwich shop that offers nearly infinite combinations of products? According to SUBWAY, “there are more than two million different sandwich combinations available" its menu.
Aside from being riddled with ambiguities, inconsistencies and impossible-to-interpret language, this blog has previously made the case that menu regulation should be the domain of uniform federal law and not inconsistent, piecemeal local ordinances. The California law is yet another argument in favor of federal preemption.
Section one of the California law cites national obesity statistics from the Centers for Disease Control and the federal Nutritional Labeling and Education Act of 1990. Nothing about this bill is specific to California. Because the law only applies to large restaurant chains, its impact is mostly on large national or regional companies. Ironically, the California legislature understood the problem of inconsistent regulation and chose to preempt all local and municipal regulation of restaurant menus. If menu regulation is an issue that needs regulation (and there are many good arguments why it does not), it should be taken up by Congress, the FDA and the USDA, not states or local municipalities.