Turning the Tide on Consumer Fraud Labeling Class Actions

Turning the Tide on Consumer Fraud Labeling Class Actions

Turning the Tide on Consumer Fraud Labeling Class Actions Kirstin Mazzeo Campbell Soup Company Melanie McIntyre ConAgra Foods, Inc. Sarah Brew, Moderator Faegre Baker Daniels

Just the Facts Presentation Facts Serving Size 55 min. Servings 1 Calories 0 Amount/Serving Latest in Natural Labeling Litigation %PV* 25% Defenses 20% Class Certification 20% Settlement Developments 20% Strategies to Avoid Litigation 10% Q&A 5% *Percent Values (PV) are based on 55 minute consumption

Food & Beverage Class Action Overview 2013 Class Action Filings by Category All Natural False Statement Fact Health Misrepresentation Evaporated Cane Juice 28% 26% 31% 15%

Allegedly Non-Natural Ingredients 8.33% 16.67% 27.78% 8.33% 27.78% 11.11% High Fructose Corn Syrup Sodium Benzoate Synthetic Additives GMOs Non-natural Alkali Others

The Current Generation of Natural Claims Genetically Engineered (GE) ingredients/gmos Processing claims Vitamins Colors

Latest Developments in Natural Litigation Slash and Burn New discovery tactics New Ingredient Targets Citric acid (enzymatically-made, solvent washed) in juices Preservative sodium acid pyrophosphate (SAPP) Other products, preservatives made through use of enzymes, solvents, acids, bases, etc. Musgrave, et al. v. Marie Callender s, et al. (N.D. Cal. May 1, 2014) Baking mixes for corn bread, muffins, and biscuits contain preservative sodium acid pyrophosphate (SAPP) According to complaint, SAPP compound also used in petroleum production, leather treatment, and to facilitate hair removal in hog slaughter

GMO Natural Litigation Briseno, et al. v. ConAgra Foods, Inc. (C.D. Cal. June 28, 2011) Plaintiffs alleged 100% Natural labeling is misleading because vegetable oil is derived from plants grown from seeds genetically engineered to allow greater yield and be pesticide-resistant Key Causes of Action Violation of California s false advertising & unfair competition laws Breach of express warranty Plaintiffs also sought permanent injunction and order requiring ConAgra to adopt and enforce a policy disclosing GE ingredients or removing of natural claims

FDA Preemption In re Wesson Oil Marketing and Sales Practices Litigation October 13, 2011 MDL assigned cases to C.D. Calif. ConAgra moved to dismiss, arguing: FDA s labeling guidance for bioengineered foods, which says disclosure is not required, preempts these claims. FDA has concluded that bioengineered foods are not meaningfully different and so claims that a food is not natural merely because it is bioengineered is preempted.

FDA Preemption: GMOs Complaint dismissed without prejudice on Rule 9(b) grounds because Plaintiffs did not adequately allege specifics of purchases or the labels, advertisements or statements relied upon Plaintiffs given 20 days to refile, which they did Claim for relief requiring ConAgra to disclose GM ingredients is preempted because draft FDA guidance does not require labeling Consumer fraud claims relating to labeling products 100% Natural when derived from GM ingredients are not preempted

FDA Primary Jurisdiction Cox v. Gruma Corp. (N.D. Cal. July 11, 2013) Defendant argued that under the doctrine of primary jurisdiction, FDA, not a judge or jury, must decide whether GMOs are natural. The FFDCA and NLEA unquestionably and squarely give [the] authority to FDA to determin[e] whether food labels may properly state that GMO products can be labeled all natural. Court stayed the case and asked FDA to address the question of whether and under what circumstances food products containing ingredients produced using bioengineered seed may or may not be labeled Natural or All Natural or 100%.

FDA s Response, January 6, 2014 Reaffirmed that FDA has declined to define natural and stands by its policy statement If FDA were to revoke, amend or change its policy, it would do so through formal rulemaking or guidance, not in litigation context Diverse stakeholder views (industry, consumer groups, USDA) require a public process Natural definition has implications beyond the narrow scope of GMOs FDA would have to consider science, consumer perceptions and beliefs, other modern food production technologies and strictures flowing from the First Amendment FDA s limited resources devoted to FSMA, nutrition labeling, etc.

Evaporated Cane Juice (ECJ) Litigation In March, FDA reopened comment period on draft guidance relating to ECJ Gives Defendants room to argue primary jurisdiction Some courts have stayed or dismissed pending FDA action Figy v. Amy's Kitchen, Inc., N.D. Cal., Apr. 9, 2014 (dismissed) Reese v. Odwalla, Inc., N.D. Cal. Mar. 25, 2014) (stayed) Other courts have declined to apply primary jurisdiction Leonhart v. Nature's Path Foods, Inc., N.D. Cal., Mar. 31, 2014 Morgan v. Wallaby Yogurt Co., N.D. Cal., Mar. 25, 2014 Issue is still pending: Gitson v. Trader Joe's Co., N.D. Cal., motion filed Apr. 24, 2014

Defenses: Did Plaintiff Actually Buy the Product? No Standing Miller v. Ghirardelli, No. 12-04936 (N.D. Cal. Dec. 6, 2013) dismissing lawsuit as to four products that plaintiff did not actually purchase because those products were not similar enough to the one product he actually did purchase Standing Anderson v. Jamba Juice Co., 888 F. Supp. 2d 1000, 1006 (N.D. Cal. 2012) There is sufficient similarity between the products purchased [ ] and not purchased [ ] because the same alleged misrepresentation was on all of the smoothie kits regardless of flavor; all smoothie kits are labeled All Natural, and all smoothie kits contain allegedly non-natural ingredients.

Defenses: Implausibility Pelayo v. Nestle USA, Inc. (C.D. Cal. Oct. 25, 2013) Dismissing challenge to ravioli and tortellini labeled All Natural and containing xanthan gum, soy lecithin, etc. because Reasonable consumer is aware that Buitoni Pastas are not springing fully formed from Ravioli trees and Tortellini bushes. Balser v. Hain (C.D. Cal. Dec. 18, 2013) Dismissing challenge to natural claim on 30 cosmetic products Plaintiff s definition is implausible as applied to the products at issue: shampoos and lotions do not exist in nature, there are no shampoo trees, cosmetics are manufactured. Labels include an explanation of natural, by listing ingredients Website defined what natural means, so no reasonable consumer would be deceived

Value of Motion to Dismiss: Too Early to Decide? Fagan v. Neutrogena (C.D. Calif. Jan. 8, 2014) 100% naturally sourced sunscreens Claim is plausible on its face But with a more developed factual record, perhaps no reasonable consumer would believe the products contain no synthetic ingredients, which are included in the list of ingredients In re Frito Lay All-Natural Litigation (E.D. N.Y. Aug. 29, 2013) What a reasonable consumer would believe the term natural to mean on a food label cannot be resolved on [a] [motion to dismiss]. Vicuna v. Alexia Foods, Inc. (N.D. Cal. Apr. 27, 2012) The question whether a reasonable consumer would likely be deceived by the designation All Natural is a factual dispute.

Class Certification Denied: Not Ascertainable Carrera v. Bayer (3d Cir. Aug. 21, 2013) No evidence of retailer records No way to know purchasers Not reliable or administratively feasible Sethavanish v. ZonePerfect Nutrition Co. (N.D. Cal. Mar. 6, 2014) Alleged synthetic ingredients Failed to establish ascertainability because defendant sells predominantly to retailers, not directly to consumers, and so there were no records to identify which consumers purchased the bars Astiana v. Ben & Jerry s (N.D. Cal. Jan. 7, 2014) No evidence as to which ice cream contained the allegedly synthetic ingredient Plaintiff has not shown that a means exists for identifying the alkali in every class member s ice cream purchases

Class Certification Denied: Not Ascertainable Astiana v. Ben & Jerry s (N.D. Cal. Jan. 7, 2014) Ice cream labeled All Natural that contained alkalized cocoa Court denied class cert on ascertainability; no common question of law or fact predominates Defendant has provided evidence that consumers are not likely to be deceived by the all natural label, while plaintiff has presented no evidence in opposition All natural has no common or consistent meaning FDA has declined to attempt to define it Alkalized cocoa would qualify as organic No expert or survey evidence supporting deception, and general articles on consumer preference are hearsay Defendant s expert and survey evidence establish no common understanding of all natural

Class Certification Denied: Lack of Uniformity Astiana v. Kashi Company (S.D. Cal. July 30, 2013) Plaintiff challenged products labeled All Natural and Nothing Artificial Court certified a Nothing Artificial class but denied certification of an All Natural class Plaintiffs failed to show that All Natural has a uniform definition that affects purchasing decisions among class members, that the representation was uniformly relied upon, or that it would be considered materially false Defendant showed consumers, industry and FDA fail to define natural in any definite manner 10 of 13 challenged ingredients allowed in organic food

Class Certification Denied: No Price Premium Under Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), a plaintiff must show that monetary relief is measurable on a class wide basis Astiana v. Ben & Jerry s (N.D. Cal. Jan. 7, 2014) Plaintiff offered no evidence demonstrating that consumers would be willing to pay a premium for all natural ice cream made with cocoa alkalized with a natural alkali (and did in fact pay such a premium) Ben & Jerry s does not sell retail and does not set retail prices Compare Lanovaz v. Twinings N. Am. Inc. (N.D. Cal. Apr. 24, 2014) Natural Source of Antioxidants claim Plaintiff won class certification but on injunctive claims only because plaintiff failed to show how damages calculated No theory offered that linked the alleged deception to any sort of price premium

Will We Ever See a Trial?

Settlement Developments Recent Settlements: Kashi settlement Private settlement v. class settlement Objectors and Opt Outs Cy Pres Concerns Dennis v. Kellogg, 687 F.3d 1149 (9th Cir. 2012) Round 1: cy pres: $5.5M worth of Kellogg food items to charities that feed the indigent Rejected by 9 th Circuit: [A]ppropriate cy pres recipients are not charities that feed the needy, but organizations dedicated to protecting consumers from, or redressing injuries caused by, false advertising. Astiana v. Ben & Jerry s, N.D. Cal. Oct. 12, 2012 Court took issue with the amount of cy pres, the lack of specificity, and the nexus between the claims and the donations

Strategies to Avoid Labeling Lawsuits Tracking labeling challenges and litigation Coordinated label review process Substantiation process Defense coordination Joint Defense Agreements Joint Defense Privilege