Turning the Tide on Consumer Fraud Labeling Class Actions

Melanie McIntyre ConAgra Foods, Inc.

Kirstin Mazzeo Campbell Soup Company

Sarah Brew, Moderator Faegre Baker Daniels

Turning the Tide on Consumer Fraud Labeling Class Actions

Just the Facts

Presentation Facts

*Percent Values (PV) are based on 55 minute consumption

Amount/Serving %PV*

Latest in “Natural” Labeling Litigation

25%

Defenses 20% Class Certification 20% Settlement Developments 20% Strategies to Avoid Litigation 10% Q&A 5%

Serving Size 55 min. Servings 1 Calories 0

Food & Beverage Class Action Overview

26%

15% 31%

28%

2013 Class Action Filings by Category All Natural Health MisrepresentationFalse Statement Fact Evaporated Cane Juice

High Fructose Corn Syrup

Sodium Benzoate

Synthetic Additives

GMOs

Non-natural Alkali

Others

27.78%

8.33%

27.78%

8.33%

16.67%

11.11%

Allegedly Non-Natural Ingredients

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 9th 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