United States: 2014 Food Industry Outlook - Food Labeling Litigation

In 2012 we observed an explosive uptick in suits targeting labeling practices of food manufacturers. That trend accelerated in 2013, as this litigation went from hot to white-hot. A year ago, we projected that in 2013, "there should be more clarity on whether these suits will remain a legitimate threat to the food industry or whether they are merely a passing fad that courts will eventually shut down." Though there is still no final answer on this question, it certainly appears these suits pose a legitimate threat to the food industry. Food manufacturers are unquestionably spending more time, energy and money defending these suits than they were even a year ago. We expect the trend to continue throughout 2014.

A few observations about labeling litigation in 2013 are instructive for the outlook as to 2014. First, 2013 saw a huge number of labeling suits filed, seemingly a new suit every day. In 2013, the chief targets were "all natural" claims, see, e.g., Garrison v. Whole Food Market Inc., No. 13-05333 (N.D. Cal. Nov. 8, 2013), and evaporated cane juice claims, see, e.g., Figy v. Lifeway Foods Inc., No. 13-04828 (N.D. Cal. Oct. 17, 2013); Miller v. Living Harvest Foods, Inc., No. 1:13-cv-23926 (S.D. Fla. Oct. 29, 2013), although food labels were challenged on a wide variety of claims. Like in most litigation, the plaintiffs' bar initially attacked labels with a variety of legal theories, but as the litigation began to mature, so have their claims. The plaintiffs' bar has learned from their mistakes in past cases and are constantly revising and improving their playbook.

We are now in the midst of the "second wave" of labeling suits, which are exemplified by narrower claims that focus on theories that the plaintiff's bar has learned through experience are more likely to survive a motion to dismiss. See, e.g., Lilly v. Jamba Juice Co., No. 13-02998 (N.D. Calif. Nov. 18, 2013); Rojas v. General Mills Inc., No. 12-05099 (N.D. Calif. Oct. 9, 2013); Reilly v. Amy's Kitchen Inc., No. 1:13-cv-21525 (S.D. Fla. Dec. 9, 2013). Accordingly, more and more labeling suits are surviving motions to dismiss and moving toward discovery, class certification and even trial. However, courts are still granting motions to dismiss, especially on primary jurisdiction and preemption grounds, see, e.g., Fisher v. Monster Beverage Corp., No. 12-2188 (C.D. Calif. Nov. 12, 2013); Pelayo v. Nestle USA Inc., No. 13-5213 (C.D. Calif. Oct. 25, 2013); Burke v. Weight Watchers Int'l Inc., No. 12-06742 (D. N.J. Oct. 15, 2013), but defendants can no longer count on getting these cases completely dismissed at the pleading stage. In fact, in many instances, even when a court dismisses a claim, it gives the plaintiff an opportunity to replead the claim in such a way as to avoid dismissal. See, e.g., Brazil v. Dole Food Co., No. 12-01831 (N.D. Calif. March 25, 2013).

Second, class certification is quickly becoming the central battlefield in this litigation rather than motions to dismiss. While the trend favors denial of class certification, courts certified classes in a few food labeling cases in 2013. See, e.g., Ebin v. Kangadis Food Inc., No. 1:13-cv-02311 (S.D. N.Y. Dec. 11, 2013); Astiana v. Kashi Co., No. 11-01967 (S.D. Cal. July 30, 2013); Thurston v. Bear Naked Inc., No. 3:11-CV-02890-H (S.D. Calif. July 30, 2013); cf. Ackerman v. Coca-Cola Co., No. 09-00395 (E.D. N.Y. Jul 18, 2013) (magistrate judge recommended certification of New York and California classes as to injunctive relief and recommended denial of certification as to monetary damages). However, courts that are granting class certification are rejecting national classes and instead only certifying narrower classes. See, e.g., Astiana v. Kashi Co., No. 11-01967 (S.D. Cal. July 30, 2013); Thurston v. Bear Naked Inc., No. 3:11-CV-02890-H (S.D. Calif. July 30, 2013). The trend remains in favor of denying class certification. . See, e.g., McManus v. Sturm Foods, Inc., No. 3:11-cv-00565 (S.D. Ill. Aug. 26, 2013); Hernandez v. Chipotle Mexican Grill Inc., No. 12-5543 (C.D. Cal. Dec. 2, 2013); Ries v. Arizona Beverages USA LLC, No. 10-011139 (N.D. Cal. March 28, 2013). Many labeling suits are just now maturing to the point where class certification decisions are ripe. 2014 should be a determinative year as to whether the tide turns in one direction or the other on the issue of class certification.

Third, some labeling suits paid dividends for plaintiffs in 2013. There were several large settlements, including a $9 million settlement in Pappas v. Naked Juice Co. of Glendora Inc., No. 11-08276 (C.D. Cal.); a $8.5 million settlement in Johnson v. General Mills, No. 8:10-cv-00061 (C.D. Cal.); and two settlements worth approximately $4 million each, see Dennis v. Kellogg Co., No. 3:09-cv-01786-IEG-WMC (S.D. Cal. Sept. 10, 2013) and Trammell v. Barbara's Bakery Inc., No. 12-02664 (N.D. Cal. June 21, 2013). As more suits are filed, it will bear watching in 2014 whether more such settlements are agreed to or whether food companies instead fight class certification.

Regulatory and Statutory Developments

There continued to be a push in 2013 by various state legislatures to expand laws requiring accurate labeling of food products, despite the fact proponents of such laws suffered a crushing defeat at the ballot box on Proposition 37 in California in November 2012. Similarly, Washington state voters narrowly rejected such a law in November 2013. The New Mexico legislature also rejected such a law in 2013, and it appears as though the New Hampshire legislature will likely do so as well. However, Connecticut and Maine both passed GMO-labeling laws in 2013, though they do not actually take effect unless neighboring/nearby states pass similar laws.

On Sept. 19, 2013, Democratic lawmakers introduced the Food Labeling Modernization Act of 2013, which proposes a sweeping overhaul of food labeling requirements addressing front-of-package labeling and allegedly misleading claims about what foods are "healthy," "natural" or "made with whole grain." Though this bill is unlikely to get out of committee, it is yet another sign that food labeling is on the minds of both state and federal legislators. The food industry will no doubt be watching legislative developments on food labeling very closely in 2014.

As for regulatory developments, in August 2013 the FDA issued a final rule to define the term "gluten-free" when voluntarily used in food labeling. It is defined as less than 20 parts per million of gluten. More importantly, in November 2013, the FDA reached a preliminary determination that partially hydrogenated oils (PHOs), or trans fats as they are generally known, are not "generally recognized as safe." If this decision is made final, "it could, in effect, mean the end of artificial, industrially produced trans fat in foods," said Dr. Dennis Keefe, director of FDA's Office of Food Additive Safety. Other priorities identified by the FDA in 2014 include energy drinks, arsenic, nanotechnology and dietary supplements.

Moreover, federal, state and local governmental authorities were very active in 2013 in enforcement related to food labeling. The FTC upheld a key decision requiring POM to have two randomized and human-controlled trials to substantiate claims that a product treats, prevents or reduces the risk of diseases. The FDA and FTC have joined forces to issue warning letters to a number of companies and there is no indication this collaboration will stop any time soon. In addition, the San Francisco city attorney filed suit against the manufacturer of Monster energy drinks due to its alleged marketing to children. The New York attorney general and the FDA are both reportedly investigating the manufacturers of energy drinks. These developments in 2013 demonstrate that the federal, state and local governmental bodies have identified food and food labeling as a priority, and that further aggressive regulatory and enforcement actions can be expected in 2014.

As exemplified by the discussion above, food labeling has quickly become one of the most active areas of litigation, regulation and governmental enforcement. The scene is rapidly changing, and even the most vigilant can have trouble keeping up with all the developments. Given the flurry of activity on food labeling in 2013, 2014 is shaping up to be an even more active year as more suits, regulations and enforcement actions are filed.

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