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January 27, 2011 Articles

Stomachaches for Food and Beverage Manufacturers Dealing with Recalls

Manufacturers now face consumer lawsuits alleging fraud, violations of warranty obligations, and false advertising claims predicated solely on economic injury.

By Carmine R. Zarlenga and Rosina “Nina” Hernández

With more than half a billion eggs recalled in August 2010—one of the largest recalls in history—recalls and food safety are a fresh topic.[1] Recalls have long sparked litigation from consumers who were actually sickened by food, but now, food and beverage manufacturers face another threat—consumer lawsuits alleging fraud, violations of warranty obligations, and false advertising claims predicated solely on economic injury from recalls. Two recent consumer class actions filed in California and one in New York are illustrative of the new threat.[2]

Viability of Claims Based on Economic Injury
In Meaunrit v. ConAgra Foods, the plaintiff filed a class-action lawsuit in the U.S. District Court for the Northern District of California after ConAgra voluntarily recalled a batch of its frozen pot pies in 2007.[3] Interestingly, the class was to be comprised of individuals who purchased pot pies after the announced recall. The complaint alleged violations of warranty and unfair competition laws, strict liability, declaratory relief, restitution, and the California Consumers’ Legal Remedies Act (CLRA).[4] The plaintiff theorized that she could not guarantee the safety of the pot pies and thus felt compelled to discard product that she had purchased. The complaint alleged that the labeling on the pot pies was deficient because it failed to note the potentially present pathogens, and not only were the cooking instructions complicated, but even if they were followed correctly, the pot pies would not reach the optimal “kill step” temperature necessary to destroy bacteriological contaminants. The plaintiff also alleged that the pot pies were adulterated because ConAgra allegedly did not properly “test and screen product ingredients” and did not “design these products to be cooked in a manner that ensures these products were safe,” and that the “design, oversight and quality controls were and are inadequate, resulting in the potential for Salmonella and other pathogens to be in these food products.”

In this instance, the litigation stomachache may be short-lived. The viability of the plaintiffs’ claims seems to be in serious doubt, and the theory was not well received. ConAgra prevailed on all three of its motions to dismiss. In its order granting ConAgra’s third motion to dismiss, the district court noted, “The complaint never goes any further than alleging that the pot pies are ‘potential’ pathogen carriers.”[5] Although the court ruled that plaintiff Meaunrit did have standing because the economic injury alleged was sufficient injury to confer standing, it nevertheless granted all three motions to dismiss for a long list of reasons. The allegations were preempted by federal food labeling and inspection laws. Meaunrit’s claims regarding mislabeling sounded in fraud, which must be pled with particularity. Meaunrit’s claims that the pot pies were adulterated were too conclusory, “fail[ed] to allege what constitutes an ‘appropriate’ control measure, and further fail[ed] to specifically allege what is inadequate about ConAgra’s procedures.” Meaunrit’s claims based on the cooking instructions “rest on the inadequacy of the instructions. However, Plaintiff seems to concede that she simply did not follow the instructions.” And finally, Meaunrit failed to provide facts to support any allegations regarding in-store promotions that were allegedly misleading.[6] After granting ConAgra’s third motion to dismiss, the district court entered judgment for ConAgra.

Taking a slightly different tact than Meaunrit, a second California consumer class-action complaint targets Kellogg Co.’s recall of products containing salmonella-contaminated peanut ingredients supplied by the Peanut Corporation of America (PCA). In Benavides v. Kellogg Co., the plaintiffs filed suit in the U.S. District Court for the Central District of California, alleging unlawful, unfair, and fraudulent business practices flowing from alleged misrepresentations that the recalled peanut products were fit for human consumption.[7] The plaintiffs also alleged misleading, deceptive, and untrue advertising and violations of the CLRA stemming from the defendant’s claims on its website of manufacturing “high quality foods,” made with “only quality ingredients” and that its suppliers met “stringent food safety requirements.” The plaintiffs alleged a continuous and systematic scheme of Kellogg representing itself as concerned with “health and nutrition, product quality, and food safety,” and fraud for failure to disclose information that its manufacturing may have caused adulteration. Benavides rounded out his allegations with three types of breach of warranty claims.

Kellogg currently has a motion to dismiss pending in this case, arguing first that Benavides fails to meet standing requirements because he does not allege actual injury.[8] Kellogg contends that when the plaintiff received the benefit of a bargain, the plaintiff did not experience economic injury.[9] Second, Kellogg argues that the claims fail as a matter of law because they do not allege facts to meet the particularity pleading requirement,[10] are puffery,[11] fail to state any duty owed by Kellogg to disclose information regarding its manufacturing processes or possible adulteration resulting from it,[12] and neglect to list the terms of any purported warranty.[13] If this case follows the same trajectory as Meaunrit, a pinball game of amended complaints and motions to dismiss will follow.

Class-Action Prerequisites
Since 2004, with California’s passage of Proposition 64, plaintiffs filing complaints alleging violations of the false-advertising law must show that they have sustained injury resulting from the false advertising and loss of money or property to have standing to sue under California’s false-advertising law.[14] However, in a controversial decision, the California Supreme Court interpreted Proposition 64 in putative class-action cases to require only the named plaintiff to allege actual injury and loss of money or property.[15] Furthermore, where the advertising campaign is alleged to be an “extensive and long-term advertising campaign” the class members arguably do not need to prove individual reliance on specific false advertisements.[16] A veritable tidal wave of consumer class actions alleging false advertising has followed.

Although the pleading requirements for class actions may be slackened, a recent case from the Western District of New York may quell the potential onslaught of class actions in food-recall cases. In Patton v. Topps Meat Company, Inc., the plaintiff filed a class-action lawsuit arising from the defendant’s recall of meat contaminated with e. coli bacteria.[17] The plaintiff alleged two seemingly distinct classes: an “injury” class for others who experienced physical illness from eating the defendants’ contaminated meat and a “consumer” class consisting of “all persons who purchased ground beef products subject to the September 25 and 29, 2007 recalls and who assert or allege claims sounding in economic loss therefrom.” The district court denied class certification under Rule 23 of the Federal Rules of Civil Procedure. With regard to the consumer class, although the court ruled that it met the typicality requirement of the rule, the district court held that the class action was not superior to other available methods for fairly and efficiently adjudicating the controversy.[18] It held that the refund program offered by the defendants was superior to the plaintiff’s proposed consumer class.

Based on the early returns, bringing a lawsuit based on the recall of contaminated food and alleging only economic injury appears tenuous at best. As plaintiffs become more creative in their pleadings, defendant food manufacturers and distributors must sharpen their substantive and procedural pencils to combat these complaints. The rules of standing and civil procedure may just be the remedy for lawsuit indigestion on the part of food manufacturers and distributors.

Keywords: litigation, business torts, food and beverage manufacturers, recall, fraud, warranty, class action

Carmine R. Zarlenga and Rosina “Nina” Hernández – January 27, 2011

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