Class Action Litigation

Some of our colleagues from Mintz Levin’s Class Action Practice, Joshua Briones, Crystal Lopez, and Grace Rosales, recently authored an interesting and timely article in the Bloomberg BNA Product Safety & Liability Reporter. The article examines certain defenses in consumer fraud class actions over product labeling – specifically, defenses based on faulty damages models. Beyond proving the factual truth of the allegedly misleading labeling claims, the authors tell us, food and other consumer product companies can combat meritless suits by showing that the plaintiff’s damages-calculation model does not meet the requirements established under Rule 23 of the Federal Rules of Civil Procedure.

When reviewing a purported class action lawsuit, Federal Rule 23(b) requires the court to determine that “questions of law or fact common to class members predominate over any questions affecting only individual members.” Generally, a consumer’s damages in a false advertising case are equal to the amount of money needed to make the consumer “whole” — that is, to compensate the consumer for the harm caused by the false claim. But measuring the actual value received by a consumer and the but-for value that consumer would have received absent the false labeling by the product’s manufacturer requires a fact-intensive economic inquiry (for example, questions related to individual consumers’ behavior and preferences, the actual amount consumers paid for the product, time frame of the purchase, etc.). As a result, according to our expert litigators, defendants in product labeling lawsuits can oppose class certification or even file an early motion to decertify by showing that the plaintiffs’ damage model cannot be calculated with proof that is “common” to the class.

Joshua, Crystal, and Grace’s full article can be viewed here. Any manufacturer or retailer of consumer products that is facing a false labeling suit should give it a quick read!

Evaporated cane juice, a term usually used to inform about sweeteners derived from the fluid extract of sugar cane, is present on the ingredient lists of many products we see on grocery store shelves. However, newly finalized FDA guidance on use of the term “evaporated cane juice” (“ECJ”) as an ingredient in food labels may change things.  Specifically:

FDA’s present view is that “such sweeteners should not be declared on food labels as ‘evaporated cane juice’ because that term does not accurately describe the basic nature of the food and its characterizing properties (i.e., that the ingredients are sugars or syrups) . . . .  Moreover, the use of ‘juice’ in the name of a product that is essentially sugar is confusingly similar to the more common use of the term ‘juice’ – ‘the aqueous liquid expressed or extracted from one or more fruits or vegetables, purees of the edible portions of one or more fruits or vegetables, or any concentrates of such liquid or puree’ (21 CFR 120.1(a)).  Thus, the term ‘evaporated cane juice’ is false or misleading because it suggests that the sweetener is ‘juice’ or is made from ‘juice’ and does not reveal that its basic nature and characterizing properties are those of a sugar.”

Continue Reading FDA Finally Decides that “Evaporated Cane Juice” Is Misleading Consumers

shutterstock_268298027Allegations are increasing against The Honest Company, Inc. for false and misleading marketing of its products as “all natural” and “plant-based” when they supposedly contain synthetic ingredients.  The Honest Company sells personal care, cleaning, and baby products in multiple channels including at retail, online and through consumer subscriptions.  The company was co-founded by the actress Jessica Alba and guarantees that its products never contain certain harsh chemicals.  Last month, a proposed class action complaint was filed in the Southern District of New York against The Honest Company and then, just last week, another putative class action was filed in the District Court for the Central District of California.

In both cases, the plaintiffs allege that the company violated each state’s consumer protection laws and also allege some variation of misrepresentation, false advertising, fraud, breach of warranty, and unjust enrichment.  These lawsuits have been spurred, in part, by a recent Wall Street Journal report which showed that the results of independent tests proved that The Honest Company’s laundry detergent contained a chemical the company advertised as not being in its products.  Reasonable people may debate whether the timing of these class action complaints was also spurred by recent news reports that The Honest Company is working on an initial public offering with a valuation that could be over $1 billion (see Bloomberg article here).  A spokesperson for The Honest Company has defended its products, stating that the “allegations are without merit.”

As readers of this blog know, plaintiffs have for several years been targeting companies that distribute foods and beverages, cosmetics, and other consumer goods like soaps and cleaning products for allegedly deceptive labeling and advertising of those products with express and implied natural claims.  Although FDA has begun what will certainly be long process towards developing standards and criteria for labeling food products under its jurisdiction as “natural” (note – the comment period for this FDA request for information was extended until May 10, 2016), the lack of a comprehensive policy has left many companies that use natural and plant-based labeling vulnerable to lawsuit.  For instance, any future FDA guidelines for food may not fit comfortably onto cosmetics or personal care products due to the different types of processing techniques used in those different industries.  In addition, answers about whether trace amounts of a synthetic ingredient in an otherwise plant-based product may require a labeling or advertising modification have not yet been determined.  As a result of these litigation risks and the regulatory ambiguity surrounding the term “natural,” we believe that companies manufacturing natural products should carefully monitor developments in this area of law.  We  encourage you to check-in with this blog as we continue to highlight the legal and regulatory landscape of “natural” consumer products.

Barber v NestleWe recently blogged about a new wave of class action litigation related to California’s Transparency in Supply Chains Act.  In December, Nestlé USA won the dismissal of a complaint against it alleging that the company was “obligated to inform consumers that some proportion of its cat food products may include seafood which was sourced from forced labor.”  See Barber v. Nestle USAThe question was whether Nestlé had a duty to disclose on its packaging the possibility that some of its suppliers or suppliers’ suppliers used illegal labor practices, particularly when it is virtually impossible to trace such practices directly to their food products.  The Central District of California found that the law recognizes a “safe harbor” and that Nestlé complied with the law by providing a limited disclosure to its customers regarding the company’s efforts to ensure compliance with labor laws on its website.

It turns out that fish used in cat food is not the only product that may include sourcing from forced labor.  Suppliers of cocoa used to make chocolate may be using forced labor and child labor in cocoa fields.  Continue Reading Another California Dismissal of Proposed Class Action Regarding Disclosure of Forced Labor in the Supply Chain

Our colleagues Michael Arnold and Gauri Punjabi recently discussed the U.S. Supreme Court’s rejection of the Federal Rule 68 “pick off” strategy on Mintz Levin’s Employment Matters Blog.  We previously blogged about this crafty strategy employed by class-action defense counsel back in November 2014.  Following the recent Campbell-Ewald Co. v. Gomez decision, defense counsel may no longer argue that a rejected Rule 68 offer that fully satisfies a named plaintiff’s claims is sufficient by itself to moot an action.  Under basic principles of contract law, the Court ruled, an offer of judgment once rejected has no force and parties retain the same stake in litigation as at the outset.  However, this decision does not necessarily foreclose defendants from “picking off” named plaintiffs by making an actual payment for the full amount of the claim.  To read more about the defeat of the Rule 68 “pick off” strategy and the actual payment option, click here.

 

 

The first round goes to the industry: on December 9, 2015, the Central District of California dismissed the complaint in Barber v. Nestle USA, a key bellwether case in a new wave of class action litigation related to California’s Transparency in Supply Chains Act. The Barber plaintiffs’ theory was that Nestle had violated California’s panoply of consumer protection statutes by failing to disclose that “some proportion of its cat food products may include seafood [that] was sourced from forced labor.”

Judge Cormac McCarthy disagreed, finding instead that Nestle’s disclosures under the Supply Chains Act were protected under California’s “safe harbor” doctrine. And as the details of the decision make clear, this is no one-off victory: the court’s reasoning sets the blueprint for companies defending against similar suits going forward.

Continue Reading Knockout in Round One: Court Dismisses California Supply Chains Act Class Action

Passed in 2010, the California Transparency in Supply Chains Act has a worthy aim: requiring retailers and manufacturers doing big business in California to disclose what measures, if any, they are taking to ensure their suppliers comply with human rights standards. What started as a legislative effort to educate consumers and incentivize good corporate citizenship, however, is quickly becoming a vehicle for private class actions against companies making this information available–even though the Act itself nowhere authorizes private lawsuits seeking damages. For consumer product companies, this is an important trend that could mark the next wave of class action litigation in California.

So what exactly does the Act require? And what litigation risks does this law now pose for companies doing business in California?

Continue Reading When Transparency Is Not Enough: Class Action Litigation Under California’s Transparency in Supply Chains Act

Non-GMO Labeling BadgeAs we’ve explored in past posts, mandatory GMO-labeling legislation has, at best, a spotty track record among state legislatures. Nevertheless, the GMO issue continues to draw the public’s attention, and it is becoming clear that the “Non-GMO” label now appeals to at least certain segments of the consumer base. Some companies in the food and beverage space will doubtlessly have good business reasons to capitalize on this market trend voluntarily by providing products that are labeled and advertised as “Non-GMO.”

But a recent lawsuit against Whole Foods in California illustrates the risk for companies hoping to take advantage of this market opportunity. With all the public controversy now surrounding GMOs, could “Non-GMO” become the new “all natural”—a labeling claim that is routinely challenged by private class actions?

Continue Reading A Taste of Things to Come? Whole Foods Feels Sting of “Non-GMO” Litigation