"All Natural" Class Action Litigation in California: What's in Store for 2012?
California litigators Tom Woods and Melissa Jones have prepared a Litigation Legal Alert on "All Natural" class action litigation in California and what to expect in 2012.
The Alert, which is linked above, provides background information regarding "All Natural" class action litigation in California. It also discusses why the authors believe that class action litigation in this area will persist in 2012. Finally, the Alert concludes with suggestions for companies that have litigation risks regarding "All Natural" claims associated with their products.
No Slow Down to Class Action Lawsuits in California Regarding Food Labeling and Marketing
By California litigators Tom Woods and Melissa Jones
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.
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.
The Show Goes On: USDC Allows Vitaminwater Lawsuit to Proceed
In an opinion issued on July 21, 2010, Judge John Gleason of the United States District Court for the Eastern District of New York largely denied the defendant’s motion for dismissal and held that 10 of the 13 claims in a class action suit brought against Coca-Cola for alleged unlawful health claims on its Vitaminwater drinks could proceed. The claims that still must be examined in court include allegations of misleading advertising, fraudulent business acts, and unfair methods of competition.
The plaintiffs in the class action, which include the health advocacy group Center for Science in the Public Interest (“CSPI”) as co-counsel, contended that Vitaminwater’s labeling and marketing is misleading because it (1) communicates a number of purported health benefits (including healthy joints, optimal immune function, and reduced risk of chronic disease), drawing consumer attention away from the significant amount of sugar (33 grams per bottle) in the product; (2) portrays Vitaminwater as healthy when it is essentially a snack food that provides nutritional benefits because it has been specifically fortified to do so; and (3) suggests that Vitaminwater contains nothing but vitamins and water.
While the court concluded, citing applicable Food and Drug Administration (“FDA”) rules and commentary, that sugar was not a “disqualifying nutrient” under applicable FDA regulations, the plaintiffs’ latter two claims were found to accurately describe violations of FDA regulations, and accordingly may serve as a non-preempted basis of state law liability.
The FDA regulations restricting health claims or implied claims of healthiness related to foods that meet certain minimum nutrient levels, colloquially termed “the jelly bean rule,” were developed in an effort to prevent food producers from encouraging the consumption by consumers of junk food by fortifying the food in question with nutrients. The “jelly bean rule” is applicable only to (1) health claims, and (2) nutrient content claims that use the word “healthy” to suggest that a food may help consumers maintain healthy dietary practices because of its nutrient content. Finding that Vitaminwater’s labeling contains claims in each of these two categories, the court ruled the plaintiffs could proceed with this claim.
The plaintiffs alleged Vitaminwater’s labeling is misleading because it uses a product name that includes two of the product’s ingredients (vitamins and water), but fails to mention another notable ingredient (sugar). FDA regulations on this subject recognize that such product names have the potential to mislead consumers. Thus, the court held that the plaintiffs were allowed to pursue this claim. In the aftermath of this ruling, Coca-Cola released a statement expressing their confidence that the plaintiffs’ claims are without merit and will ultimately be rejected. Given that the implications this case could carry into the growing functional food and beverage segments of the market, we will continue to track it closely.
Difficult Week for the Food Industry (Good Week for the Plaintiffs' Bar): HVP Salmonella and FDA Warning Letters
The week of March 1 saw a double whammy hit food manufacturers.
I. Open Letter to Industry on Marketing Claims
First, on March 3, FDA sent warning letters to 16 food manufacturers concerning their labeling practices. FDA also issued an Open Letter to Industry warning against certain practices. For example, FDA warned that:
o Nutrient content claims that FDA has authorized for use on foods for adults are not permitted on foods for children under two. Such claims are highly inappropriate when they appear on food for infants and toddlers because it is well known that the nutritional needs of the very young are different than those of adults.
o Claims that a product is free of trans fats, which imply that the product is a better choice than products without the claim, can be misleading when a product is high in saturated fat, and especially so when the claim is not accompanied by the required statement referring consumers to the more complete information on the Nutrition Facts panel.
o Products that claim to treat or mitigate disease are considered to be drugs and must meet the regulatory requirements for drugs, including the requirement to prove that the product is safe and effective for its intended use.
o Misleading “healthy” claims continue to appear on foods that do not meet the long- and well-established definition for use of that term.
o Juice products that mislead consumers into believing they consist entirely of a single juice are still on the market. Despite numerous admonitions from FDA over the years, we continue to see juice blends being inaccurately labeled as single-juice products.
II. HVP Recall
A day later, on March 4, FDA announced a recall of hydrolyzed vegetable protein (HVP). As of noon on March 4, 56 products containing HVP have been recalled. Some have suggested that HVP is the "Next Peanut Butter.”
III. What Food Companies Can Do in the Wake of FDA's Warning Letters and HVP Recall
What do last week's FDA warning letters and HVP recall have in common? The answer is, of course, litigation and exposure of brand value.
The first thing any affected food seller should do is engage its crisis management team. While lawyers and public relations staff are critical in crisis response, management of the crisis should not be left solely in the hands of either. Decisions should be made holistically, examining legal, public relations, business, financial and public health implications.
As discussed previously in this blog, companies faced with putative class claims filed as a result of the FDA warning letters on labeling should develop strategies to challenge the merits of the claims and class certification at the earliest possible stage. The end game for the plaintiffs' class action law firms is to obtain class certification and use that "litigation blackmail" to enter into a settlement with a handsome payout of attorneys’ fees.
For those companies with products that include recalled HVP, the good news is that there are few, if any, reported illnesses. The bad news is that recalls are very expensive and, for some companies without recall coverage or sufficient resources, financially devastating. Many food manufacturers were driven out of business in 2009 after being overwhelmed with the expenses of recalling products that included ingredients manufactured by Peanut Corporation of America (PCA).
For those affected companies with recall coverage or financial means, proactive measures can pay dividends. For example, offering refunds to consumers mitigates against putative class claims. Setting up consumer hotlines and payment of medical expenses for persons with illnesses linked to recalled products mitigates against personal injury suits.
One Lesson From Fitzpatrick v. General Mills: Class Cert. Tough To Oppose In Consumer Fraud Cases When Plaintiffs Don't Have To Demonstrate Individualized Reliance/Causation
Last month Judge Paul Huck of the U.S. District Court for the Southern District of Florida granted in part and denied in part class certification on claims brought in Fitzpatrick v. General Mills. Judge Huck granted class certification on claims asserted under Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) but denied class certification for claims of breach of express warranty.
The named plaintiff asserted violations of FDUTPA and express warranties for purchases of Yo-Plus yogurt. Plaintiff "alleges that eating Yo-Plus does not provide any digestive health benefits that cannot be obtained from eating normal yogurt."
Judge Huck ruled that in Florida, unlike in many other jurisdictions, consumer fraud claims do not require a showing of actual causation and reliance. Rather, in Florida "each plaintiff is required to prove only that the deceptive practice would—in theory—deceive an objective reasonable consumer." And for that reason, the court found that causation under the FDUTPA does not defeat the predominance requirement of class certification.
While FDUTPA does not require individualized causation and reliance, claims of UCC breach of express warranty do require individualized showing of "the particular promise that created the express warranty," according to the court. For that reason, the court held that "individual issues would predominate as to the breach of express warranty claims."
The Fitzpatrick ruling illustrates the difficulties defendants have in resisting class certification for consumer fraud claims in jurisdictions where the court finds no requirement of individualized reliance or causation.
Consumer Fraud Claims: Examples of Good and Bad Motion Practices
The Good: Tropicana recently brought a motion to dismiss the Zupnik putative consumer fraud class claims pending against it. Zupnik alleges that Tropicana misled consumers in the promotion of its “Pure 100% Juice Pomegranate Blueberry Flavored Blend of 5 Juices from Concentrate with other Natural Flavors” because its front label did not include pictures of fruits other than pomegranates and blueberries.
Tropicana’s motion, brought under both FRCP 9(b) and 12(b)(6), appears as a good example of how putative consumer class claims can be challenged at the outset of the case. Though we don’t yet know whether Tropicana will be successful, its pleading is a sharp attack on the plaintiff’s complaint and takes advantage of the heightened pleading requirements announced recently by the Supreme Court.
Tropicana moved on the basis that the complaint lacks particularity required under Rule 9(b) (the rule requires pleading of the “particularity of the fraud”). It also challenged whether the plaintiff had any injury in fact or alleged any reliance on particular advertising. Finally, Tropicana argued that Zupnik’s claims were expressly preempted by federal law.
Tropicana cites to Twombly to urge the court to disregard “plaintiffs legal conclusions . . . even when made, as here, in the guise of factual allegations.”
Tropicana also attacks Zupnik’s complaint on the basis that “she got what she paid for.” Tropicana points out that its product sold for far less than juice with a higher level of pomegranate or blueberry juices. Because she got what she paid for (presumably regardless of whether she understood it at the time of purchase), she lacks standing to bring a claim for consumer fraud.
The Bad: Coincidently, in another case involving a putative consumer fraud class claim over depictions of fruits on a label, Judge Gorton of the United States District Court for the District of Massachusetts in Wiley v. Gerber Products Company granted Gerber’s motion to transfer to the Southern District of California for consolidation with the Williams case pending in California. (The Williams case was previously discussed in this blog.)
The lesson from Wiley v Gerber: if your strategy is to avoid transfer of venue, think about this when pleading. For example, do not include allegations in the complaint about a nationwide class and the application of different states’ consumer protection laws.
Wiley argued against transfer, contending that the “Court’s familiarity with Massachusetts law, under which several claims are brought weights against transfer.” The problem is that “in her amended complaint, Wiley added several claims under New Jersey state law which only undermines her contention that this Court is especially competent to adjudicate the state laws at issue in this dispute.” Wiley also alleged a nationwide class. The court found that the plaintiff’s choice of forum mattered little when she alleged a nationwide class.
Energy Drink Maker Sued Over Alleged Health Risks
The maker of Redline energy drinks has been sued in federal court in California. The plaintiff, Zack Aaronson, is seeking class action status for his lawsuit against Vital Pharmaceuticals, Inc. (operating under the trademark VPX).
The plaintiff claims that VPX failed to adequately warn consumers of potential side effects and health risks associated with consuming VPX’s Redline energy products. Among other things, the plaintiff alleges that consumers have reported adverse side effects including chills, excessive sweating, vomiting, convulsions, chest pains, and rapid heartbeat.
According to VPX’s website, Redline is available as energy drinks and gel caps. The company touts the products as “the first physique-transforming matrix to coax your body to burn fat through the ‘shivering response.’”
The case is Aaronson v. Vital Pharmacetucals, Inc., S.D. Cal. Case No. 09-1333. A copy of the complaint is available here.
Judge Denies Class Action Status in McDonald's French Fry and Hash Brown Litigation
A lawsuit claiming that McDonald’s deceived the public about ingredients in its french fries and hash browns will not proceed as a class action. A federal judge in Chicago has denied the plaintiffs’ motion for class certification, characterizing the proposed class and subclasses as “too indefinite and overbroad.”
According to the court’s opinion, the potato suppliers who provide McDonald’s with its french fries and hash browns par-fry the potatoes in oil made of 99 percent vegetable oil and one percent natural beef flavor. The beef flavor is partly made from wheat bran and casein (a dairy product). McDonald’s restaurants then fry the potatoes in 100% vegetable oil prior to serving the products to customers. Plaintiffs allege that McDonald’s falsely claimed its french fries and hash browns were gluten, wheat, and dairy-free. They say that they never would have purchased the potato products if they knew that the fries and hash browns were partially fried in oil containing wheat bran and casein. McDonald’s corrected its disclosure in 2006.
The plaintiffs proposed a class consisting of all persons residing in the United States who purchased McDonald’s french fries or hash browns between February 2002 and February 2006 and who, at the time of purchase, had been diagnosed with celiac disease, galactosemia, autism, and/or wheat, gluten, or dairy allergies.
In rejecting class certification, U.S. District Judge Elaine Bucklo noted that none of the plaintiffs has suffered any physical injury from eating the potato products; indeed, she noted that “plaintiffs testified in their depositions that they were quite satisfied with the Potato Products they consumed.” Additionally, Judge Bucklo noted that proving economic damage would be an “evidentiary headache” because the court would be required to review potentially millions of letters proving plaintiffs’ medical diagnoses and the damage to each potential class member would be nominal: between $1.00 and $1.50. Finally, the court ruled a nationwide class action would be unmanageable because state laws at issue in the case vary too much to apply to plaintiffs from across the country.
The case is In re McDonald’s French Fries Litigation, MDL No. 1784.
