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.
Court Cuts Back Claims In Great Pomegranate Dispute
By Guest Blogger Jay Eckhardt
In a dispute over product labeling and marketing, the Coca-Cola Company avoids liability as a result of its careful compliance with FDA rules. (Also, see Rick's post from last week, regarding Coca-Cola's victory in a dispute over its original formula label found on Coke® Classic.) But pomegranate champion POM Wonderful can still pursue a Lanham Act deceptive advertising claim against the company.
On May 5 the U.S. District Court for the Central District of California issued summary judgment orders that cut out two of POM's claims against Coca-Cola's "Minute Maid Enhanced Pomegranate Blueberry Flavored 100% Juice Blend." (Download a copy of the Central District of California's Order here.)
The court acknowledged that consumers have griped about the emphasis on pomegranate and blueberry in the Minute Maid product labeling and advertising. (See Ken's post about a consumer class action concerning Tropicana's pomegranate blueberry juice blend here.) Still, the court agreed with Coca-Cola that POM could not bring a Lanham Act claim challenging the product name, because the company complied with FDA labeling requirements. The Minute Maid product contains less than one-half of one percent (0.5%) pomegranate and blueberry juice, but the court determined that the name is compliant with FDA rules, which allow for product names that prominently cite ingredients that are less than prominent in volume. Because the label clearly notes that the juice is "flavored" with pomegranate and blueberry juice and that the juice is a "blend" of several juices, the court held that the name complies with applicable FDA regulations (21 C.F.R. §§ 102.33(c) and 101.22(i)(1)(i)).
A second claim raised by POM was thrown out by the court. POM sought restitution under California Business & Professions Code section 17200, which provides a cause of action for "Unfair Competition." The court dismissed this claim because "restitution" has been narrowly interpreted by the California Supreme Court, thus barring POM's claim for recovery of a "lost business opportunity." Among authorities cited for the decision to dismiss this claim, the court reported that POM's similar claims under California's Unfair Competition law, brought against Tropicana and Welch's, have recently been dismissed in separate actions.
A third claim survived Coca-Cola's summary judgment attack. POM may proceed under the Lanham Act to challenge the marketing and advertising for the "blueberry pomegranate" product. The court held that POM may attempt to prove at trial that advertising and marketing actually deceived customers, or that Coca-Cola willfully and intentionally misled customers with the marketing of its product.
As noted from the court's order, Coca-Cola is not the only target of POM's litigation strategy. Other juice makers, Tropicana and Welch's, have been the focus of POM's efforts to defend its niche. Ken reported on POM's challenge to Ocean Spray's pomegranate cranberry juice blend last August, when POM survived Ocean Spray's initial motion to dismiss all claims.
An inspired marketing campaign for POM's products, and its essential ingredient, helped build the pomegranate franchise. It's hard to say whether litigation against advertising and labeling practices of POM's pomegranate competitors will be effective. At the same time, there's no doubt that POM is well aware of the burdens of FDA labeling regulations – the company was one among 17 companies notified by the FDA last February that its product labeling and advertising did not pass muster. The FDA warned POM that its advertising was suspect, based on the health claims made on its web site about the benefits of pomegranate juice.
"Always Coca-Cola"? Who Knows?
On April 27, the U.S. District Court for the Southern District of Illinois dismissed the case of Kremers v. Coca-Cola Company. The case involved another of these ubiquitous claims where someone is suing saying they were fooled by labeling on a product. Unfortunately, the case was dismissed on grounds that indicate we might never really know the answer to the real gravamen to the plaintiffs’ complaint.
The claim involved the change, famous in product lore, from Coke to “new Coke” and then back to “Coca-Cola classic.” In 1985, Coca-Cola Company announced it was reformulating its flagship brand, renaming it “New Coke.” Two months later, having learned that brand loyalty may indeed trump blind taste tests, it relaunched its old formula as “Coca-Cola classic.” Eventually, New Coke was renamed “Coke II” and is, according to Coca-Cola Company itself, no longer available in the United States.
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The Kremers case involved what, at least on the can of Coke® I borrowed from my office, is a tiny legend at the bottom of the can, saying “Original Formula.” The claim was that the original formula” of Coca-Cola included sugar, not high fructose corn syrup, and therefore the phrase “Original Formula” was misleading, requiring, of course, the company to cough up damages to everyone who had been fooled by the phrase.
Unfortunately for the two named plaintiffs, fortunately for Coca-Cola Company and definitely unfortunately for anyone who wanted to find out the answer to the question of whether “Original Formula” could in fact be misleading, the two plaintiffs had different, but equally dispositive, flaws in their cases. Lead plaintiff Amanda Kremers couldn’t beat the five year Illinois statute of limitations for claims of unjust enrichment. She admitted in her deposition that she had first heard that high fructose corn syrup was in Coke® way back in the 1990s. Second named plaintiff Jason McCann admitted on deposition that he’d never read the words “Original Formula” on the can, which made it basically impossible for him to claim he was deceived. And both plaintiffs admitted to continuing to buy Coke® even after the case was brought, when they clearly could not have been deceived about the contents of the beverage, since they were already suing its manufacturer. 
The unanswered question in the case is interesting. As you can see, the type size for “Original Formula” is about the same as the type size for “High Fructose Corn Syrup” on the ingredients label. That would probably argue against anyone being reasonably misled by the one by somehow failing to look at the other.
More to the point, however, is that the history of Coca-Cola does not support the plaintiff’s case. The “formula” of Coca-Cola is proprietary and a trade secret (though how much of a secret is of course the subject of debate). Coca-Cola used to include real live cocaine, as opposed to completely decocainized coca leaves. According to Snopes, at some point in the 1920’s
glycerin was added as a preservative, cocaine was eliminated, caffeine was greatly reduced, and citric acid was replaced by phosphoric acid, to name the changes we know about.
By “Original Formula,” they quite clearly mean “not that New Coke stuff everyone complained about in 1985.” Coca-Cola Company itself admits they misunderstood their own customers then; they’re just reassuring them now.
Also according to Snopes, when New Coke was introduced in 1985, there was no sugar in Coke®. So focusing on the high fructose corn syrup, as opposed to the other changes, seems likely to be an attack on HFCS more than anything to do with being fooled by which Coca-Cola formula is in the can.
Of course, if you want Coke® with real sugar, it’s available from Mexico (Sugared Coke® is also available in the United States in some areas around Passover, because observant Ashkenazic Jews don't eat corn during the holiday).
I haven’t drunk Coke® in years, but this past winter we were visiting some Mayan ruins and on the way back had lunch in Bacalar, where we had a choice of beer, bottled water and Coke®. I chose the Coke® and after one sip I realized that this was the beverage I had grown up with. Yes, sugar in Coke® does, at least to these taste buds, make a difference. But I can also read a label.
Challenges of a Lanham Act Injunction in Food Cases: Lessons from an Advertising Battle Between Two Major Consumer Products Companies
The recent decision in Stokely-Van Camp, Inc. v. Coca-Cola Co. (i.e., Gatorade vs. Powerade) illustrates the hurdles a company has to overcome to convince a court to stop a competitor from using arguably false advertising. Stokely-Van Camp, Inc. (“SVM”) was challenging advertising that compared Powerade ION4 to Gatorade Thirst Quencher.
Judge John G. Koeltl of the Southern District of New York characterized the case as “an advertising battle between two major consumer products companies over one company’s comparison of its beverage to human sweat.”
Following a two-day preliminary injunction hearing, the court denied a request to enjoin various advertising claims about Powerade ION4. Ultimately, to succeed, SVM, makers of Gatorade, had to show (1) likelihood of irreparable harm and (2) either a likelihood of success on the merits or serious questions going to the merits that were sufficient to make them fair grounds for litigation, with a balance of hardships tipping decidedly in its favor.
As with any request for a preliminary injunction, this is a difficult standard to meet. Personal experience is that no matter the legal standards, judges often revert to the “is a building going to collapse?” gut-check approach.
“Unclean hands” are also a big deal when it comes to injunctions. Courts are very reluctant to grant injunctive relief if they get a sense that the moving party is itself guilty of the acts it complains of.
In the SVM case, the court came down against SVM on the second prong concerning the merits of its Lanham Act false advertising and trademark dilution claims. The court ruled that the claims were moot (because Coca-Cola already dropped the aggrieved advertising campaign), nonactionable puffery or, for the implied falsity claims, not supported by extrinsic evidence.
The court went further in addressing irreparable harm. Even if SVM’s claims were merited, the court did not believe SVM was entitled to a presumption of irreparable harm, because Coca-Cola discontinued the comparison ads. The court also found SVM’s arguments of a public health risk unconvincing.
Perhaps the most interesting lesson is the court’s final conclusion of law that SVM had “unclean hands.” Even if SVM’s injunction motion had met the legal standard, fatal to its motion would have been that “SVC complains about Coca-Cola’s claims regarding the presence of calcium and magnesium in Powerade ION4, but it has made virtually identical claims about calcium and magnesium in its own Gatorade Endurance Formula.”
The court concluded by saying, “SVC cannot, having jumped on the bandwagon of calcium and magnesium first, now jump off and claim that Coca-Cola must get off too.”
