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Lessons From The Food Industry Litigation Swarm

Benjamin P. Broderick, Senior Attorney

Theodora Oringher PC

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The Food Industry’s Experience Should Concern Every Company Because:

The consumer fraud claims currently focused on the food industry can be readily transferred to other industries.

The food industry’s experience offers clues as to how to avoid and defend against “litigation

swarms.”

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What is a “Litigation Swarm?”

A series of similar lawsuits against a particular industry or practice

Driven by theories of liability rather than individual injuries

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pharmaceutical

Where Have Litigation Swarms Occurred in the Past?

asbestos

tobacco

food

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2) Special Risk Factors:

a) Careless or deceptive advertising practices

b) High jury identification with plaintiff/ low jury

identification with defendants

c) Spotty regulation

d) Single-message marketing

e) Numerous competitors making similar claims

f) Deep pockets

Where Will The Next Swarm Strike?

1) Consumer fraud claims lend themselves to litigation swarming:

a) Lenient state consumer fraud legislation

b) Common marketing practices

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“Litigation swarms” reverse the dynamics of “stand-alone” suits

Consumer false advertising litigation follows a simple formula:

Allege a “uniform” misrepresentation or omission as the basis for a putative class action

Bring suit in a favorable venue

Demand millions or tens of millions of dollars in “damages”

How Do Litigation Swarms Work?

Alleged

InjuryLegal

TheoryLawsuit

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The Food Industry's Experience

Sugar Conten

t

Caloric Conten

t

“healthy”“all

natural”

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How Has the Food Industry Defended Itself?

Emphasis on motion practice – few cases resolved by trial

Basic defenses Preemption/primary jurisdiction Failure to state a claim (Iqbal/ Twombly) Challenge class certification: Attack common proof of

exposure to ads, reliance, causation, and/or damages

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Results

Many individual successes

Failure to quell the swarm

0

20

40

60

80

100

120

2007 2008 2009 2010 2011 2012

Year

Su

its

Fil

ed

Overall, the number of false advertising-based class actions complaints against food manufacturers and retailers multiplying more than 10 times in just four years.[1] --------------------------------------------------------------------------------[1] The statistics are based on information obtained through searches performed on the LexisNexis Courtlink service, which searches filings in both state and federal courts across the nation.

Growth in Consumer Fraud-related Food Industry

Class Actions

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What’s Driving the Food Industry Swarm?

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Why So Many Settlements?

Costs and distraction of litigation

Fear of potential catastrophic

liability

Desire to avoid bad publicity

Desire to avoid bad precedent

(2011) -- $45 million

(2013) -- $8.5 million

(2011) -- $7 million

(2012) -- $7.5 million

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Long Term Result

Steady diet of juicy settlements multiplied the swarm of litigation 10 times in just 4 years

Many defendants have been sued a dozen or more times:

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Long Term Result Other frequent FICA defendants include:

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Lessons From the Food Industry’s Experience

Individual victories won’t abate the

swarm

Settlements may not protect you from a

swarm

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What Can You Do To Protect Your Company From Litigation Swarms?

1. Develop More Rigorous Advertising Review Protocols

a) Thorough consumer research

b) Careful verification of claims

c) Avoid pseudo-scientific claims

d) Conduct regular proactive legal reviews

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What Can You Do To Protect Your Company From Litigation Swarms?

2. Develop a pro-active/long-term defense strategy

a) Improve information collection

b) Improve information dissemination

• More information

• More information sources

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What Can You Do To Protect Your Company From Litigation Swarms?

c) Customize consumer contact

• Avoid single-message advertising campaigns.

• Communicate with customers through a variety of methods.

• Offer customization, if appropriate

• Offer refunds, trial periods, etc.

d) Take account of long-term settlement costs.

e) Devise methods for cost and risk sharing to counteract the extortionate impact of consumer fraud claims.

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Conclusions

1) Success in individual cases through after-the-fact defenses and routine settlement approaches aren’t enough to combat a litigation swarm. 2) To avoid and/or defeat a consumer fraud litigation swarm, businesses must spend the time and resources to:

a) get the advertising right, and b) develop a forward-looking comprehensive

defense strategy emphasizing

i) better information collection and dissemination,

ii) more individual customer contact,iii) fewer juicy settlements.