food and beverage class action final slides august 2015...kraft cookie and cracker products...

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©2015 Foley & Lardner LLP • Attorney Advertising • Prior results do not guarantee a similar outcome • Models used are not clients but may be representative of clients • 321 N. Clark Street, Suite 2800, Chicago, IL 60654 • 312.832.4500

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©2013 Foley & Lardner LLP

Presenters

Michael D. Flanagan (Moderator)Foley & Lardner LLPPartnerFood & Beverage Industry [email protected]

Craig S. FochlerFoley & Lardner [email protected]

Aaron J. WeinzierlFoley & Lardner LLPSenior [email protected]

Jaclyne D. WallaceFoley & Lardner [email protected]

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EXPANSION OF CLASS ACTIONCLAIMS

Consumer class actions used to be associatedwith tobacco, asbestos, medical products injuriesand SEC violations.

Today, they are brought against virtually everytype of business under a variety of legal theories:

Currently, the most targeted activities are foodand beverage labeling and advertising.

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- Employment issues- Antitrust violations

‒ Deceptive advertising.‒ Breach of product warranty.


PARTIAL LIST OF COMPANIES ANDPRODUCTS TARGETED

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5 Hour Energy Del Monte fruit/vegetable products

7 Eleven Diamond Food Walnuts

7UP products with antioxidants Dole Fruit products

Anheuser-Busch Cos. Beer Dreyer’s Grand ice cream

Arizona ice tea Dreyer Grand ice cream drumstick

Balance energy bars Ferrero Nutella

Bear Naked 100% natural products Frito-Lay chips

Bear Naked all natural products Frito-Lay snacks

Ben & Jerry’s ice cream General Mill’s Fruit Roll-Ups

Breyer’s ice cream General Mill’s Kix cereal

Campbell’s soup varieties General Mill’s Yoplait YoPlus

Chobani Greek yogurts Grove Square coffee

Clover Stornetta Farms yogurts Hain Celestial products

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PARTIAL LIST OF COMPANIES ANDPRODUCTS TARGETED (Cont’d)

Jamba Juice Do-It Yourself Smoothie Nature Valley granola bars

Jason Natural products Nature Valley snacks

Johnson & Johnson Splenda Nature Path organic products

Kashi all natural products Nestle chocolate

Kellogg’s Froot Loops, Pop-Tarts etc Hot/Lean Pockets

Kellogg’s Frosted Mini-Wheats Ocean Spray drinks

King Arthur Flour Co. products One World Co. O.N.E. coconut water

Kraft cookie and cracker products Quaker’s Mother’s Natural cereals

Kraft/Cadbury – numerous products Redline energy enhancers

McDonald’s Happy Meals Smuckers “all vegetable” products

Nabisco Fruit Newton cookies Snapple acai mixed berry red tea

Naked Juice SoBe’s 0 Calories Lifewater

Naked Juice all natural products Super Mario fruit snacks

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PARTIAL LIST OF COMPANIES ANDPRODUCTS TARGETED (Cont’d)

Taco Bell ground beef

Tetley teas

Trader Joe products

Turtle Mountain dairy-free products

Twinings tea

Wholesoy yogurt products

ZonePerfect energy bars

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WHY ARE FOOD AND BEVERAGECLAIMS SO POPULAR?

The large pool of potential plaintiffs – everyoneconsumes food and beverages.

The large number of potential target products.

– Competitors often make the same or similarclaims as their competitors.

Consumer deception is a state of mind claimwhich encourages creative pleading.

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WHY ARE FOOD AND BEVERAGECLAIMS SO POPULAR? (Cont’d)

Plaintiffs’ lawyers have numerous sources fromwhich to obtain ideas for claims.

– Regulatory agency actions, e.g. FDA, FTC,USDA.

– Self-regulating organizations, e.g., NAD.

– Activists groups, e.g., CSPI, Consumer Union.

– The Internet, e.g., bloggers, consumercomplaint and review sites.

– Competitor actions.

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WHY ARE FOOD AND BEVERAGECLAIMS SO POPULAR? (Cont’d)

Broad consumer protection laws.

Class action friendly courts, e.g., California federal andstate courts, Illinois, Florida and New York federal courts.

Plaintiffs’ lawyers:

– Know companies are going to settle.

– Obtain exorbitant fees.

Some courts have recognized these cases areprimarily for the lawyer’s benefit.

But, there is a judicial trend to reduce fees beingawarded.

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FOOD AND BEVERAGE CLAIMSPLED

Composition

– All Natural/PHOs/Organic/ECJ

– Proposition 65

Condition Description

Health Facts

Geographic Origin Description

Manufacture Description

False testimonials/certifications

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RECENT FOOD AND BEVERAGECLAIMS PLED

Use of “All Natural” and “100% Natural” recentlyattacked as deceptive based on:

– Artificial or synthetic ingredients

Ascorbic Acid

SAPP – Sodium Acid Pyrophosphate

– GMO ingredients

Recent Legislation - July 22, 2015: HousePassed Safe and Accurate Food LabelingAct H.R. 1599

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RECENT FOOD AND BEVERAGECLAIMS PLED (Cont’d)

“All Natural” and “100% Natural”

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– Partially HydrogenatedOils (PHOs)

June 16, 2015 – FDAdetermined PHOs areno longer generallyrecognized as safe foruse in human food.

Three year period tocomply or petition theFDA to permit specificuses of PHOs.

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– Organic

Use of “organic” on labeling is regulated by theUSDA National Organic Program (“NOP”).

NOP permits more restrictive state organic

programs.

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– Evaporated Cane Juice

FDA issued draft guidance stating use of“evaporated cane juice” was misleadingbecause it is not the common or usual name ofcertain sweeteners.

Many cases stayed under primary jurisdictiondoctrine pending FDA final guidance.

Earlier last month FDA advised thatfinal guidance is anticipated toissue before the end of 2016.

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Proposition 65

– Prohibits businesses from knowingly exposingindividuals to over 900 substances, identifiedby the state of California as causing cancer orreproductive toxicity, without providing a clearand reasonable warning.

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Condition Description:

– Fresh.

– FDA regulations prohibituse of “fresh” whenproduct has beenfrozen, subject tothermal processing orany other form ofpreservation.

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Use of terms relating to product health facts:

– Healthy

– Antioxidants

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Geographic OriginDescription

– “The most famous berryin the Himalayas”

– “Originated in Germany”

– “Germany Quality

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Product ManufactureDescription:

– Made in store

– Handmade

– Hand crafted

– “Craft”

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WHAT CAN A COMPANY DO TO AVOIDFALSE ADVERTISING CLASS ACTIONS?

Keep abreast of regulatory activity and classaction claim trends.

Encourage marketing to avoid using “hot button,”e.g., “all natural,” and undefined, e.g., “Pure,”terminology.

Conduct thorough claim clearance. Establish clear procedures and

accountability for each step. Form a team with all required competencies,

e.g., R&D, Operations, Legal. Ensure compliance with all FDA and USDA

regulations.

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WHAT CAN A COMPANY DO TO AVOID FALSEADVERTISING CLASS ACTIONS? (Cont’d)

Consider all consumer interpretations oflabel or advertising claims individually and inthe aggregate.

Ensure solid substantiation for eachinterpretation.

Educate business personnel not to communicateliability risks or concerns with anyone outside ofthe company, or even anyone in the companywithout a need-to-know.

If a risky claim is unavoidable, work withmarketing to present in the most defensiblemanner.

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HOT ISSUES BEFORECERTIFICATION

Preemption.

Primary Jurisdiction.

State Law Class Action Prohibitions.

Standing.

Possibly, Summary Judgment.

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PREEMPTION

Implied Preemption:

– Field Preemption – has Congress expressedan intent to exclude state regulations from aparticular field?

– Conflict Preemption – does a staterequirement conflict with a federal requirementmaking compliance with both requirementsimpossible?

Express Preemption:

– Is claim based solely on use of specific FDAmandated or approved matter?

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THE DIFFICULTY IN PREDICTINGPREEMPTION RULINGS

Preemption issues are rarely straight-forward, suchas, plaintiff claims FDA approved language used inapproved manner is deceptive.

Most involve fact intensive claims alleging implieddeception.

Many times, courts conduct intricate legal analysesthat lead to different decisions by different courts.

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PRIMARY JURISDICTION

Under the doctrine, a Court will stay or dismiss the caseand refer the dispute to the FDA for ruling.

Reasons for Referral:– Judges do not have experience with the issue.– Risks usurping the FDA’s interpretive authority.– Risks undermining the FDA’s considered

judgments. Reasons against Referral:

– Courts decide disputed issues all the time.– FDA ruling may not resolve issue.– FDA may not rule/ruling may not be timely.

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OTHER PRE-CERTIFICATION ISSUES

State Law Class Action Prohibitions.

– Restrictions on class actions under state law.

– Shady Grove Orthopedic Assocs, P.A. v.Allstate Ins. Co., 559 U.S. 393 (2010).

Standing.

– Products Not Purchased.

– Injunctive Relief.

Possibly, Summary Judgment.

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SUMMARY JUDGMENT

Named plaintiff not deceived or damaged by alleged falseclaim, e.g., did not read it or buy the product.

Plaintiff lacks required evidence of reasonable consumers’interpretations of alleged false, implied claim.

– No survey evidence, or, successful Daubert challengeto plaintiff’s survey evidence.

– No other direct consumer evidence.

Alleged false claim not material to consumer purchasedecision.

– May require expert evidence.

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CLASS CERTIFICATIONREQUIREMENTS

Rule 23 Class Certification Requirements:– Numerosity

Joinder must be impracticable. Class must be ascertainable by objective criteria.

– Commonality There must be questions of law or fact common to the class.

– Typicality Claims or defenses must be typical of the claims or defenses of the

class.– Adequacy of Representation

Representative parties must fairly and adequately protect classinterests.

– Predominance Common questions must predominate over any questions affecting

only individual members.– Superiority

Class adjudication must be superior to other methods for fairly andefficiently adjudicating the controversy.

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ASCERTAINABILITY

Recognized as an implicit requirement under Rule 23

– Class must be sufficiently definite that its class members areascertainable

– Class membership must be defined clearly and be based onobjective criteria

Recent Interpretations:

Carrera v. Bayer Corp., 727 F.3d 300 (3rd Cir. 2013)

Karhu v. Vital Pharmaceuticals, Inc., No. 14-11648, 2015WL 3560722 (11th Cir. June 9, 2015)

Mullins v. Direct Digital LLC, No. 15-1776, U.S. App.LEXIS 13071 (7th Cir. July 28, 2015)

Awaiting decision from 9th Circuit

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ASCERTAINABILITY (Cont’d)

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INDIVIDUAL ISSUES IN FALSEADVERTISING CLAIMS

Did the putative class member purchase theproduct?

Was putative class member misled?

What was the cause of putative class member’smisimpression?

Why did the putative class member purchase theproduct?

Damages.

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DAMAGES

Under the Supreme Court’s decision in ComcastCorp. v. Behrend, if damages are not measurableacross the entire class, “questions of individualdamage calculation will inevitably overwhelmquestions common to the class.”

A plaintiff’s failure to offer a damages modelcapable of measuring damages attributable to thedefendant’s conduct should preclude classcertification.

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DAMAGES (cont’d)

Recoverable damages are generally recognizedas the difference between the price paid becauseof the misrepresentation and the value of theproduct, i.e., the price premium.

‒ A misrepresented caffeine drink has some value,e.g., hydration, flavor, energy.

– Full purchase price damages are available onlyif the product has no value, e.g., ineffectivemedicine, seed that does not grow.

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EARLY DEFENSE ACTION STEPS

Determine if there is insurance coverage.

Self discovery:

– Interview likely key witnesses for problems.

– Evaluate whether problem documents exist.

Determine monetary exposure.

Determine possible impact on trade customer.

Obtain evaluation of likelihood of successfuldefense on merits and opposition to classcertification.

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EARLY DEFENSE ACTION STEPS(Cont’d)

Determine expert needs.

Obtain estimate of fees and costs for each stagethrough class certification.

Evaluate possibility of early settlement.

If reasonable early settlement not possible initiatean aggressive defense.

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SETTLEMENT CONSIDERATIONS

Most settlements are on an individual, not a class,basis.

– This leaves the defendant exposed to samesuit by other plaintiffs.

Pre-filing settlement:

– May avoid copycat suits.

– Often obtainable if sales and likely damagesare demonstrably small.

– Often less expensive than litigating throughcertification decision.

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SETTLEMENT CONSIDERATIONS(Cont’d)

Large monetary exposure may dictate:

– Motions to dismiss or for summary judgment.

– Fighting class certification.

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Questions?

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food and beverage class action final slides august 2015...kraft cookie and cracker products...

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