September 19, 2012
William Shakespeare once wrote, “What’s in a name? That which we call a rose by any other name would smell as sweet.” Shakespeare, while perhaps the greatest writer in the English language, would never have made it as a lawyer. Because, as a recent litigation trend makes clear, what is in a name, what label one gives to describe an item, makes a huge difference, at least with regard to the potential liability of a food manufacturer.
One of the most explosive litigation trends in our tort system right now is the large uptick in the number of suits targeting the labeling practices of food manufacturers. Indeed, a huge number of such suits have been filed in 2012 alone. Last month, the New York Times featured a lengthy page-one article on Aug. 18, 2012, titled “Lawyers From Suits Against Big Tobacco Target Food Makers,” comparing recent suits against the food industry to those against the tobacco industry. And more such suits appear to be on the way. In fact, there is an initiative currently on the ballot in November in California, Proposition 37, also known as The California Right to Know Genetically Engineered Food Act, that, if passed, could increase the number of such suits exponentially.
This article will briefly give an overview of the current litigation that exists and an overview of Proposition 37.
B. Overview of Current and Threatened Lawsuits
The current landscape of such lawsuits can be divided into three categories, each of which will be discussed below.
Most of the lawsuits related to labeling involve groups of plaintiffs suing a food manufacturer. Most allege that the labeling of the food item in question was somehow deceptive. One recent example is a lawsuit filed against a manufacturer of granola bars alleging that the bars were deceptively labeled as “all natural.” See Janney v. General Mills, case number 4:12-cv-03919 (N.D. Calif.). Another, a bit older, claimed that a food manufacturer’s products, including vegetarian patties and pancakes, were marketed as containing less fat and fewer calories than they actually had. See Elias et al. v. Ungar’s Food Products Inc. et al., case number 2:06-cv-02448 (D. N.J.).
These lawsuits typically allege negligence, misleading and deceptive advertising, fraudulent business practices, unjust enrichment, common law fraud, negligent and intentional misrepresentation, breach of warranty, breach of applicable state consumer protection acts and even Lanham Act false advertising claims. Most of these suits attempt to certify a national class of consumers, with a few focusing instead on a state class. These suits often seek nominal monetary compensation for the affected consumers. For instance, one recent case resulted in a settlement that offered consumers who had purchased the allegedly deceptively labeled product $4 for each jar previously purchased, up to $20 total. See In re: Nutella Marketing and Sales Practices Litigation, case number 3:11-cv-01086 (D. N.J.). They usually seek injunctive relief as well — a change in the label.
Such suits, at least in recent months, have mostly been filed in one of two jurisdictions — California and New Jersey. California appears for now to be the favored forum for these suits based in large part on that state’s strong statutory prohibitions against false or deceptive advertising.
These suits have met with mixed success thus far. While some have resulted in multimillion-dollar settlements against the food manufacturer —see, e.g., In re: Nutella Marketing and Sales Practices Litigation, case number 3:11-cv-01086 (D. N.J.); andElias et al. v. Ungar’s Food Products Inc. et al., case number 2:06-cv-02448 (D. N.J.) — others have been dismissed. See Shenkman v. One World Enterprises, LLC, case number BC467165 (Los AngelesCounty).
There have also been recent lawsuits by those in the food industry against others in the food industry related to labeling. One example is a lawsuit by a group of sugar growers against Archer Daniels Midland Co. and three other high fructose corn syrup producers, alleging that the defendants conspired to deceptively brand corn syrup as a “natural” product equivalent to sugar. See Western Sugar Cooperative et al. v. Archer-Daniels-Midland Co. et al., case number 2:11-cv-03473 (C.D. Calif.). The sugar growers allege that they have lost business as a result of the alleged deception. Recently, the trial court rejected the defendants’ motions to dismiss and allowed the suit to proceed against most of the defendants. The defendants have now filed counterclaims against the plaintiff. By all accounts, the monetary damages at stake are potentially huge, considering the plaintiffs have alleged that the defendants have already spent at least $50 million on their rebranding effort. Those in the food industry can expect to see more such suits against them filed by competitors in the future.
The third category of recent labeling lawsuits involves actual and threatened lawsuits by governmental bodies against food manufacturers. For instance, last month, a trial court in California approved a multimillion-dollar settlement between three tuna companies and the district attorneys for three California counties in a lawsuit contending that the tuna companies deceived consumers by underfilling tuna cans that they produced. See People of the State of California v. Bumble Bee Foods LLC et al., case number RC1211729 (Calif. Sup. Ct., County of Riverside).
An example of a threatened lawsuit is the recent investigation by New York’s attorney general against three large makers of energy drinks. The investigation centers on whether these companies are deceiving consumers concerning the contents of these drinks. To date, the New York attorney general has already issued subpoenas to the energy drink makers as part of the probe. Increasingly, governmental bodies are turning their attention to food manufacturers and their labels.
C. Overview of Proposition 37
This trend of suits related to labeling against those in the food industry only seems to be gaining momentum. Various state legislatures appear to be moving to expand laws requiring accurate labeling of food products. For instance, legislatures in at least 20 states have introduced legislation that would require the labeling of genetically engineered food. In fact, in California, it appears that a new law requiring labeling of genetically engineered food will likely pass as a ballot initiative in November.
This proposed law, known as Proposition 37, or The California Right to Know Genetically Engineered Food Act, would require labeling on raw or processed food offered for sale to consumers if it is made from plants or animals with genetic material changed. In addition, Proposition 37 would prohibit the labeling or advertisement of any such food as “natural,” “naturally made,” “naturally grown” or “all natural.” Enforcement of any violations would be through existing regulations and the Consumer Legal Remedies Act, which includes actual damages, injunctive relief, restitution, punitive damages and attorneys’ fees. While this proposed law does contain some exemptions, such as food sold in a restaurant, medical food, alcoholic beverages and food that unknowingly and unintentionally contains genetically engineered material, many observers believe that if Proposition 37 passes, it will have a huge impact on the food industry and expand potential liability. And passage looks likely as of now, with polls showing that the measure is leading by more than 40 points.
The stakes in this new wave of lawsuits are high. The addition or omission of literally one word in a label can potentially lead to millions of dollars in liability for a company. McGuireWoods LLP has significant experience in this type of litigation and is well-suited to defend clients against such lawsuits.
McGuireWoods LLP’s food and beverage team has significant experience in this type of litigation and is well-suited to defend clients against such lawsuits.