Editor's note: This article originally appeared in the May/June print issue of Food Manufacturing.
David L. Ter Molen, Partner and member of the Food Industry Team at Chicago law firm Freeborn & Peters LLP discusses some of the latest topics and trends when it comes to labeling in the food industry in this Q&A.
Q: Food companies have seen significant risks connected to the labeling and marketing of food and beverage products in recent years. What key factors should food manufacturers consider in order to better protect themselves moving forward?
A: The primary risks in marketing and labeling food and beverage products are (1) basic regulatory compliance, and (2) the threat of class action lawsuits. Compliance with FDA and USDA labeling regulations, including matters such as allergens, is generally straightforward. The larger concern is the threat of class action lawsuits with respect to issues that lack the specificity of government regulations where there is legal uncertainty. To protect themselves from potential lawsuits in this regard, a company must fully analyze its own messaging to identify potential risks and then conduct a cost-benefit analysis as to whether those risks are acceptable. And to fully analyze its own messaging, one must evaluate all potential messages being conveyed by a product’s labeling and marketing as a whole. That is because lawsuits are generated by lawyers and activists who assert claims based on the contention that it is reasonable for consumers to construe the product’s messaging as deceptive or misleading. The types of claims most frequently targeted are “natural” claims, ingredient quality claims and implied “healthy” claims.
Q: “Natural” and “all natural” claims remain the biggest targets of class action lawsuits against food companies. What should food manufacturers be doing to protect themselves in these instances, and what other claims should they be wary of making in relation to products?
A: If a product with a “natural” claim contains ingredients that could be alleged as synthetic or artificial, including GMO ingredients, or is more than minimally processed, it is a potential target for class action litigation. Counsel should be sought as to the potential risks involved in continuing to use the “natural” labeling. In this regard, many companies are simply removing “natural” claims and using other methods to convey a similar message. For example, many products simply emphasize that they contain “no artificial flavors or preservatives.” In addition, more companies are emphasizing a limited number of natural-sounding ingredients with minimal processing, for example, “made with only strawberries and cane sugar” or “simply granola.” Finally, there is an increase in companies qualifying their “natural” claims by including their own definition of “natural” on the product label or on an associated web site referenced on the label. This provides an added defense in potential litigation that any belief contrary to that definition is unreasonable.
Q: What recent legal cases involving labeling within the food industry should food manufacturers be paying attention to, and why?
A: Most labeling class actions are settled before any rulings on the merits of the case. There are therefore very few court rulings that draw bright lines as to the types of labeling claims that can result in actual liability or how companies can insulate themselves from potential liability. Several recent and anticipated rulings, however, should help provide such guidance in 2015.
In Brazil v. Dole Packaged Foods, LLC, the district court granted defendant Dole’s motion for summary judgment of the plaintiff’s false labeling claims. The plaintiff asserted that certain of Dole’s fruit cups in 100% fruit juice were not “All Natural Fruit” because they contained ascorbic acid (commonly known as Vitamin C) and citric acid, which were allegedly synthetic ingredients. The court agreed with Dole that the plaintiff had not presented sufficient evidence supporting its contention that reasonable consumers were likely to have been misled by the “All Natural Fruit” label. In this regard, the court said that the plaintiff’s testimony, standing alone, was insufficient. In addition, the plaintiff offered no evidence that citric acid and ascorbic acid “would not normally be expected to be in” those products, as the FDA’s informal definition of “natural” requires.
That ruling was echoed in Khasin v. The Hershey Co., involving a consumer class action alleging that the chocolate company misled customers about antioxidants in its products. In March 2015, the court ruled that the plaintiff did not present sufficient evidence to show that the statement “natural source of flavanol antioxidants” was “likely to mislead reasonable consumers.” Notably, the court ruled that even assuming that the statement violated FDA regulations, “not every regulatory violation amounts to an act of consumer fraud.” The court further held that, with respect to claims under California law, the plaintiff can't simply argue how consumers could react; he must show how consumers actually do react. As additional grounds for rejecting the lawsuit, the court held that the plaintiff presented insufficient evidence to show economic injury, which is becoming a larger problem for plaintiffs that rely on highly technical and narrow issues. Both of these rulings will provide some ammunition against class action plaintiffs.
Finally, in Kane v. Chobani Inc., plaintiffs alleged that Chobani deceptively labeled (1) an ingredient as “evaporated cane juice” when it was really just sugar and (2) products as “all natural” when the yogurt was artificially colored with fruit and vegetable juice concentrates. In February 2014, Chobani succeeded in dismissing the lawsuit. With respect to “evaporated cane juice,” the court rejected the allegation that the plaintiffs either had no idea this was a sweetener or, if a sweetener, that it was healthier than sugar. Similarly, the court ruled that the plaintiffs failed to allege how the processing of the juices rendered them “unnatural.” The case is on appeal to the U.S. Court of Appeals for the 9th Circuit and a ruling is expected this year. Given the district court’s ruling, the appeals court has the opportunity to draw some bright lines as to the viability of these types of claims.
Q: GMO labeling is a much-discussed topic in the food industry. What does the future hold for GMO labeling?
A: Last year saw an increasing number of food companies label their products as free of genetically modified organisms (GMOs) along with continued efforts to mandate labeling of GMO-derived foods. These trends are obviously at cross-purposes to some extent and the growth of GMO-free labeling may diminish the asserted need for mandated labeling.
The debate over GMO labeling, and by extension the safety of GMO foods, is presently being fought in federal court. Several food industry trade groups, including the Grocery Manufacturers of America, filed suit in June 2014 to prevent Vermont’s GMO labeling law from going into effect in June 2016. That law is the first successful effort at the state level to implement GMO labeling. Notably, attorneys representing Vermont have expressly argued that the law was “expressly prompted by health and safety concerns.”
The debate over GMO ingredients will not end when the court rules on Vermont’s GMO labeling law. Rather, the judge will likely determine only whether the Vermont legislature had a reasonable basis for determining that potential health risk exists with GMO-derived foods. That ruling, however, will be strong fodder for the winning side in future battles over this contentious issue.
David L. Ter Molen is a partner and member of the Food Industry Team at the Chicago law firm Freeborn & Peters LLP. His areas of focus include intellectual property litigation and complex disputes with a focus on the food and beverage industry. Reach him at 312-360-6432 or [email protected], and read his blog at http://foodidentityblog.com