Takeaways from 2010 GMA Food Litigation Conference
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Stoel Rives was a sponsor of this year's GMA food litigation conference in Austin from February 22 to 25. The slide deck from Ken Odza's presentation on consumer fraud class claims can be viewed by clicking on the image to the left.
Some of the takeaways from my presentation and those by others at the conference include:
- Assure Marketing Is in Sync with R&D (to Avoid Exposure from Consumer Fraud Class Claims) (Ken Odza, Paul Benson, Richard Fama)
The point was underscored in several presentations that exposure on consumer fraud class claims often comes from unsupported marketing claims (health claims in particular). Marketing departments should make sure not only that claims are supported but that the supporting research is not contradicted by other credible internal or external research.
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Iqbal/Twombly Makes FRCP 12(b)(6) Motions More Attractive (Ken Odza, Richard Famas)
The Supreme Court has overruled the Conley standard on Rule 8 notice pleading. "Plausibility" is the new pleading standard on a Rule 12(b)(6) motion to dismiss. If the operative allegations are not factually specific and the complained-of-conduct can be explained by another obvious reason, the complaint may be dismissed. -
Class Certification in Consumer Fraud Cases Not Likely If Individualized Reliance/Causation Need to Be Proven (Ken Odza)
A court should deny class certification in a consumer fraud case under the FRCP 23(b) "predominance" standard (1) when the proposed class includes multiple states with materially different statutes or (2) where the applicable state law requires an individualized showing of reliance/causation for each class member.
- Inexorable Pursuit of Zero, and the EPA Asserting Itself in Food Safety (Scott Rickman, Bob Brackett)
As technology improves and chemicals can be detected at lower and lower levels, regulators are looking at stricter standards and lower thresholds. EPA, for example, has a renewed emphasis on risk assessments that will inevitably affect food regulation.
- FALCPA Does Not Apply to Restaurants, but "Allergen-Free" and "Gluten-Free" Claims Must Be Supported (Joseph Bottiglieri)
- Pros and Cons Of MDLs (Paul LaScala)
Paul La Scala provided a thorough and thoughtful analysis of the pros and cons of Multi-District Litigation (MDL) from a defendant's perspective.
- FDA Recall Procedures Manual Is a Great Resource and Can Be Found Online (Tom Mazziotti)
The FDA's regulatory procedures manual (or at least the chapters related to recalls) should be mandatory reading as part of any company’s recall preparedness program.
- Class Actions and Mass Torts on the Rise Internationally with More Countries Passing Plaintiff-Friendly Laws (Greg Fowler)
American companies selling products abroad need to be aware of and prepared for litigation abroad with rules that are increasingly unfriendly to business.
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 Class Claims Presentation at GMA
In just a couple of weeks (Feb. 23-25), I’ll be in Austin for the GMA Food Claims & Litigation Conference. Let me know if you plan to attend. I’ll be presenting with Scott Rickman from Del Monte Foods on consumer fraud class claims arising from food product labeling and marketing. Anyone in the business of selling branded food products should be tracking the trends in consumer fraud class claims. Thanks to the erosion of preemption defenses and increased FDA enforcement action, we’re see many more of these claims, and more result in protracted litigation.
If you’re interested in a preview of the consumer fraud issues that we’ll cover, look at the related posts here. If you can’t be in Austin, let me know and I’ll be happy to share the PowerPoint slide deck and supplemental materials.
Also, if there’s something related to consumer fraud claims or food liability that we haven’t covered in the blog or that you’d like to see more coverage on, please let me know. We at foodliabilitylaw.com would love to hear your feedback. Thanks!
Court's Decision on CR 12(b)(6) Motion In Zupnik: FFDCA Preemption Under Further Attack and Twombly Ignored
We previously cited the motion to dismiss in Zupnik, et al. v. Tropicana Products, Inc. as an example of good pleading practice in a putative consumer fraud class case. United States District Judge Dale S. Fischer apparently disagreed with our assessment, this week issuing an order denying the motion.
Tropicana’s lead argument was a failure of pleading. Tropicana attacked the complaint both on the basis of Rule 9(b), and under the Supreme Court’s recent decision in Twombly. The Twombly decision requires the federal court on a Rule 12(b)(6) motion to determine whether operative factual allegations are “plausible” and more than simply “conclusory.”
Judge Fischer rejected summarily Rule 9(b) arguments. She completely disregarded Tropicana’s Twombly arguments, failing even to mention the Supreme Court’s decision.
Tropicana also moved to dismiss based on federal preemption. Most of Judge Fischer’s decision is devoted to the preemption argument. She ruled that since California’s Sherman Law is substantively identical to 21 U.S.C. § 343(a) of the FFDCA, the preemption argument fails.
Judge Fischer theorized that even though plaintiffs could not point to anything on Tropicana’s label that violated any FDA regulation, the FDA could bring an enforcement action “to target specific false or misleading labels.” If the FDA can bring that kind of action under 21 U.S.C. § 343(a), plaintiffs, according to Judge Fischer, should also be able to bring a private right of action under the identical California law. Query whether Judge Fischer’s reasoning negates any FFDCA preemption defense to a claim brought under California’s Sherman Act?
Food Liability 2010: More of the Same and Landmark Change?
We’re in the “crystal-ball” season—time to look forward and assess what’s coming in 2010 and beyond. The most likely scenario: more of the same and landmark change.
More of the Same
The last few years have seen growth in both the number of food-borne illnesses detected and the variety of foods affected. This is because more resources are being put into detection (though the CDC recently reported an overall decline in epidemiological capacity by the states) and technology is continuing to advance (think Next Generation Sequencing). There’s little reason to believe these trends will abate in 2010. Expect more outbreaks. Expect to hear about recalls of products not previously implicated in food-borne illness.
Landmark Change
Nobody doubts that we’re in the midst of the most significant legislative and regulatory changes in food safety in generations. Most believe that Congress will pass some form of food safety legislation (e.g., S 510 or HR 2749) in the new year. It will likely include the most comprehensive food safety reform in decades. Among other things, this legislation is likely to give FDA mandatory recall power and great authority for risk-based inspections, and require FDA to create a traceability program.
FDA and USDA are already pushing the boundaries of their current authority to become more aggressive on food safety and labeling enforcement. Examples include USDA moving toward classification of Salmonella as an adulterant, more aggressive rules on ground beef safety, and increased retail enforcement. FDA is already studying how traceability could work, being more aggressive in identifying products and retailers in the event of recalls, reexamining the effectiveness of current nutritional labeling requirements, and investigating whether front of pack nutrition labeling (FOP) practices need to be regulated.
And on the heels of legislative reform and increased regulatory enforcement come the lawyers. Action by the government creates new avenues for the plaintiffs’ bar. Food litigation will likely increase in prevalence both in product liability claims (i.e., food contamination) and in putative consumer fraud class claims into 2010 and beyond.
HFCS Labeling Case: Opening The Floodgates For New Consumer Claims?
The Third Circuit may be close to opening the floodgates of claims against food and beverage manufacturers who use high-fructose corn syrup (“HFCS”) in products labeled “all natural.” Shannon Duffy at the Legal Intelligencer reported recently on a “lively hour-long” oral argument in the Third Circuit about reversing a District Court’s dismissal of state consumer claims against Snapple for use of HFSC.
The District Court dismissed the consumer claims in 2007 on the basis of field preemption. The dismissal predated the Third Circuit’s decision in Fellner v. Tri-Union Seafood, LLC. See our previous blog on the Fellner case. Despite the FDA’s position in Fellner that a state law failure-to-warn claim is preempted by federal law, the Third Circuit ruled to the contrary.
In Fellner, a claim by a person who suffered from mercury poisoning after eating canned tuna literally for breakfast, lunch and dinner for five years may have been an outlier. But reversal of the District Court’s decision in the Snapple case will open the floodgates to consumer class action claims against a whole slew of food sellers and manufacturers.
Preparation for Melamine Issues- Updating Crisis Management Plans and Insurance Coverage
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While largely under the radar in the American press due to the compelling election cycle and historical meltdown in the financial markets, the news out of China concerning melamine has gone from bad to worse. Concern about Chinese dairies has morphed into a global crisis affecting what seems like an infinite number of products tainted with melamine.
Melamine has been intentionally introduced into animal feed, dairy products, pet food and other products because it can make diluted or poor-quality products appear to be higher in protein by elevating the total nitrogen content detected by some simple protein tests. Already, the FDA has identified a wide variety of products affected in the first wave of concerns about Chinese dairy products.
How should a food manufacturer or retailer prepare for a melamine issue? Any food company that imports any food ingredient or product from Asian markets should be concerned, and its first steps should be to update its crisis management plan and rehearse a melamine recall.
Food companies should also review with coverage counsel and their brokers whether they have—or can obtain—insurance coverage for financial exposure from melamine tainted products. Financially, a food company will be affected by a melamine issue in at least three ways: recall costs, loss of business and personal injury/consumer fraud claims. Standard comprehensive general liability (“CGL”) insurance may not cover any of these exposures. Most CGL policies do not cover recall costs. While recall and property insurance policies are available, the coverages offered by these policies also may be problematic.
Even personal injury or consumer fraud claims might be denied by CGL insurers. For example, many CGL policies will only provide coverage for occurances that arise out of events that are “accidental.” “Accident” is commonly defined as “a sudden, unforeseen or unintended event.” Even though a food company may have no knowledge of an upstream supplier’s fraudulent acts, some insurers are sure to argue that claims arising from products intentionally tainted by melamine are not covered.
The insurer's argument denying coverage is not a slam dunk and may not prevail. But, the key is to avoid (or minimize) the dispute with the insurer. To the extent possible, when placing insurance, a food company should obtain a representation or endorsement from its insurer that coverage will be extended to claims arising from melamine-tainted food.
New York Times on Nutraceuticals
The New York Times has a piece on nutraceuticals that caught my eye as an example of the news media’s skepticism about fortified food. The article begins:
“O[ff] the coast of Peru swim billions of sardines and anchovies: oily, smelly little fish, rich in nutritious omega-3 fatty acids. Their spot on the food chain is low; many will be caught, ground up, and fed as fishmeal to bigger animals.
“But a few have a more exalted destiny: to be transported, purified and served at North American breakfast tables in the form of Tropicana Healthy Heart orange juice and Wonder Headstart bread. These new products promise to deliver the health benefits of fish oil without the smell and the taste — without, in fact, the fish.”
But the article’s author, Julia Moskin, without citation or attribution, poses these loaded questions: “Are we really that close to a world in which food functions as a nutrient delivery system, made possible by microencapsulation and fine-spray coating? And what would this mean for food and human nutrition?”
In the end, Ms. Moskin’s piece appears full of cynicism and doubt about the industry. She writes off nutraceuticals as a cheap marketing ploy:
“[W]ith recent rising costs in raw materials, flavorings and transport, many food companies are refocusing their research and development; instead of adding expensive ingredients like sun-dried tomatoes or honey-roasted almonds to existing products, the search is on for inexpensive ‘value-added’ products that customers will pay extra for.”
Ms. Moskin does quote claims made by the industry but notes that university scientists disagree with the claims—implying that these scientists must be right because they are not employed by industry.
To me, the article demonstrates the need for the industry to invest in more independent research and verification. As the nutraceuticals industry matures and grows, claims by industry will be met with growing suspicion and, inevitably, assertions of “consumer fraud.” Consumers may believe health claims by small health food companies that they “trust.” But once those same companies (and their industries) grower larger, people by their nature become more skeptical.
