Food companies continued to see significant risks associated with the labeling and marketing of food products in 2014, highlighted by the continued deluge of consumer class action lawsuits. Although these risks will remain substantial in 2015, the coming year should see significant breakthroughs in labeling and legal strategies to mitigate and defend against those risks. New risks, however, will likely emerge, especially in connection with restaurants.
The Most Targeted Claims and Strategies for Minimizing Risks
“Natural” and “all natural” claims continue to be the biggest targets of class action lawsuits followed by ingredient quality claims and “healthy” claims. Ingredient quality claims include statements such as 100% fresh squeezed orange juice or pure coconut water. Such absolute claims about a product’s ingredients (“100%” and “pure”) have the same problem as “All Natural” claims because room exists to quibble with that definition. For example, if “100% fresh squeezed” orange juice is stored for a period of time and/or reconstituted, then one can quibble with the accuracy of that claim. For “natural” and ingredient quality claims, companies are using alternative claims to convey similar messages. The most common is claiming “no artificial flavors or preservatives.” More recently, 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.” In addition, many companies are qualifying their “natural” claims by, for example, including an asterisk and then providing their meaning of “natural” on the label.
As for “healthy” claims, these suggest that a product is wholesome or healthy when it contains “non-wholesome” ingredients such as saturated fats or added sugars. The Nutella lawsuit from 2012 is the best example. Nutella was touted as being made with “simple quality ingredients like hazelnut, skim milk and a hint of cocoa.” The lawsuit alleged that this statement and related marketing was misleading because Nutella contains 10.9g of added sugar per serving and 2g of saturated fat. The best strategy for minimizing the risk of similar lawsuits – besides minimizing the use of explicit or implied claims that a product is wholesome or healthy – is disclosure of relevant nutrient information on the front label of a product as advocated by the “Facts Up Front” campaign from by the Grocery Manufacturers of America.
Legal Developments Will Provide More Guidance in 2015
The growth in lawsuits targeting food companies has continued, in part, because it has not been accompanied by legal rulings that provide guidance to food companies. Instead, most cases have resulted in settlements. Several recent and anticipated rulings, however, will help clarify the law in 2015.
For example, 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 succeed in dismissing the lawsuit. With respect to “evaporated cane juice,” the court rejected the allegation that 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 Ninth 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.
In addition, 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 made no showing that reasonable consumers were likely to have been misled by the “All Natural Fruit” label. Notably, the court rejected the plaintiff’s testimony, standing alone, as 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. This ruling from Dec. 8, 2014, will provide some ammunition against class action lawsuits in 2015.
Calorie Posting Requirements for Restaurants Brings Risks
Restaurant chains will likely be the next targets for class action lawsuits. The FDA has issued its final calorie-posting requirements for restaurant chains having 20 or more locations. Those calorie statements will be closely watched by plaintiffs’ attorneys who are more frequently using food testing laboratories to evaluate the veracity of claims. Because foodservice involves more variable products, there is the risk that nutrient disclosures might be incorrect if they are not routinely updated. For example, if more salt and cheese is added to improve a particular item, then there is an obvious risk that the prior disclosure for sodium, fat and calorie disclosures are not accurate. Accordingly, a foodservice company must have good internal communication regarding such changes in order to determine whether a particular item should be retested.
The Status of GMO Labeling in 2015
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 since food products are either GMO-free or they are not. And the growth of GMO-free labeling may diminish the asserted need for mandated labeling. In fact, Oregon voters rejected a GMO-labeling imitative in the November 2014 election.
Although Vermont passed a GMO labeling law, scheduled to go into effect in 2016, the Grocery Manufacturers of America filed suit to block that law. Among other arguments, the association contends that the law violates the First Amendment by compelling manufacturers to “convey messages they do not want to convey.” The result of that lawsuit, expected this year, will play a pivotal role in whether other states move forward with similar laws. And any steps in that direction will likely have to come from the states since it appears unlikely that Congress will take action at the federal level with respect to GMO labeling.
David L. TerMolen 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