Be(A)ware of Litigation Involving Caffeinated Products

The FDA’s recent investigation of the safety of caffeinated products, particularly the effects of such products on children and adolescents, is top-of-mind for food and beverage manufacturers. The recent litigation involving Monster Beverage Corporation is a matter of which all manufacturers of caffeinated products should both be aware and beware.

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The FDA’s recent investigation of the safety of caffeinated products, particularly the effects of such products on children and adolescents, is top-of-mind for food and beverage manufacturers. The recent litigation involving Monster Beverage Corporation (Monster), focusing on some of the same issues investigated by the FDA, is a matter of which all manufacturers of caffeinated products should both be aware and beware.

What’s the Monster Litigation About?

On December 12, 2012, a consumer class action was filed against Monster in federal court in California seeking damages for alleged unfair and deceptive business practices.  The allegations in the class action complaint are that Monster knew its products contained excessive amounts of caffeine which were dangerous to children and adolescents, failed to disclose that information in its advertising or on its product labels, but nonetheless targeted its marketing to children and adolescents despite alleged health risks to them. The City Attorney for the City of San Francisco subsequently launched an investigation into Monster’s marketing and sales practices. 

On April 29, 2013, Monster filed a lawsuit against the City Attorney, alleging that the City’s investigation violates Monster’s rights under the First and Fourteenth Amendments of the U.S. Constitution and that the lawsuit is preempted by the Federal Food, Drug, and Cosmetic Act. One week later, the City Attorney filed suit against Monster, making claims similar to those asserted in the consumer class action — namely, marketing to children and adolescents despite alleged health dangers.

Setting aside all of this “legalese,” the practical advice to manufacturers is simple: Be proactive, prepared and perceptive by following this checklist:

1. Focus on the science.

Be prepared by knowing your product and the science behind it.  Have a firm grasp of the FDA’s position on and research into your product, as well as an arsenal of scientific literature supporting the safety of your product. Stay abreast of new scientific publications about caffeine, and consistently update your repository of scientific support for your product. Rely on scientific literature that will be recognized by the FDA as authoritative.

Be proactive by retaining scientific experts before you are confronted with litigation.  Hiring experts can provide you with guidance at the investigative stage, help you proactively identify and address potential issues, and assist in minimizing potential liability.

2. Know your facts.

Marketing communications and labeling are likely to be central issues in litigation regarding your products. As seen in the Monster litigation, a primary focus is on how those products are marketed to children and adolescents. Be prepared by understanding the facts of your marketing and advertising, including the message, the target audiences and the various methods of marketing communications, including social media.

Ensuring that labeling and product promotion are in compliance with regulatory requirements is also a time-intensive but necessary endeavor. Is your product correctly classified a dietary supplement, rather than a food or beverage? Can you substantiate the claims made in your advertising? There are implications not just for the FDA, but the FTC as well. Be proactive by identifying potential experts who can assist in the defense of your labeling and promotional materials.

3. Know the law.

Be proactive, prepared and perceptive by knowing the legal landscape. Consumer protection laws vary from state to state, and there are certain jurisdictions, such as California, which continue to be magnets for consumer class actions. Two recent U.S. Supreme Court decisions bode well for class-action defendants, on both procedural and substantive issues. In Standard Fire Insurance Co. v. Knowles (March 19, 2013), the Court rejected a named plaintiff’s attempt to thwart removal of a case from state to federal court by stipulating to damages below the Class Action Fairness Act’s $5 million jurisdictional threshold. In Comcast Corp. v. Behrend (March 27, 2013), the Court ruled that the “rigorous analysis” which district courts must undertake in determining whether to certify a class action applies to damages issues, even when those issues overlap substantially or even completely with the merits.

Daubert v. Merrell Dow Pharmaceuticals is an older, yet equally important U.S. Supreme Court case. It set the standard for admissibility of expert testimony by preventing unreliable, “junk science” from being utilized in litigation. Under Daubert, expert opinion on the effects of caffeine must derive from scientifically valid methodologies or reasoning to be valid, and there is an encouraging trend of applying Daubert to experts at the class certification stage.

4. Understand your company’s ultimate business objectives.

The successful handling of legal disputes requires the development of comprehensive strategies aimed at achieving and maintaining your company’s business objectives.  Finding the right approach for your company means knowing what your ultimate business objectives are and understanding how litigation might threaten those objectives.  Be perceptive by evaluating non-adversarial options that will further the company’s business objectives while minimizing exposure to costly, time-consuming litigation.

On one end of the spectrum is Monster’s proactive litigation against the San Francisco City Attorney. On the other end of the spectrum is to do nothing and defend against the litigation as it comes. There is also the “non-litigation” option — approaching the FDA directly and proactively addressing any issues of concern. There are pros and cons to all three of these strategies, and there is no one-size-fits-all approach. Some combination of all three approaches may be appropriate. The key is to keep all options open and ensure your dispute resolution strategies are consistent with your business objectives.

5. Develop an effective communications plan.

Once litigation or an investigation begins, it may be challenging to communicate the facts about your product to your customers and the public at large. An effective communications plan is clear, concise and easily accessible and ensures that all of the facts and your company’s position are conveyed accurately. 5-hour ENERGY®’s “Get the Facts Then Decide” campaign is one such example. Be prepared by identifying litigation consultants who can evaluate the effectiveness of your company’s communications and the potential reaction of customers and the public should litigation arise.

Cari Dawson is a Partner at Alston & Bird and chairs the Class Action Practice Team of the Litigation and Trial Practice Group.  She specializes in complex litigation matters and focuses on the defense of consumer class actions nationwide.  Cathy Burgess, a Partner at Alston & Bird who focuses on regulatory compliance, product risk management, enforcement and policy matters affecting industries regulated by the FDA, and Lindsay Carlson and Natasha Alladina, associates in the Litigation and Trial Practice Group, assisted in the writing of this article.

 

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