April 17, 2012 Articles

Consumer Lawsuits Arising from "Green" Labeling Claims

"All natural" may not mean what it used to.

By C. Kinnier Lastimosa

Consumers are purchasing healthy, organic, and all-natural foods like never before. Perhaps not surprisingly then, the number of companies extolling the “green” benefits of their foods has exploded in recent years. And, as with most successful developments, plaintiffs’ lawyers and creative legal theories are usually not far behind. In the last couple of years, numerous consumer fraud lawsuits—many on a class-action basis—have been filed alleging that food products were falsely or deceptively labeled as “all natural” or “100% natural.” Generally speaking, the lawsuits allege that the foods were not completely “natural” because they contained synthetic ingredients such as chemicals, man-made compounds, and genetically modified organisms. In one particularly inspired filing just this week in Miami, a number of grocery retailers were sued for alleged false and deceptive marketing because their private-label honey brands unnecessarily removed all traces of naturally occurring pollen, allegedly in violation of Florida’s “honey standard of identity.” With such inventive theories, any food producer (or retailer) that uses (or sells) preservatives, synthetic chemicals, or genetically modified organisms are potential targets, at least until the Food and Drug Administration (FDA) provides further guidance on the definition of “natural.” Companies faced with such litigation should be aware that they are not without defenses separate and distinct from the FDA and whether the ingredient indeed qualifies as “natural.”

Uncertainty about whether certain ingredients are “natural” exists because the FDA has not formally defined the term. For about 20 years, the only guidance from the FDA had been an “informal policy” indicating that “natural” means that “nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected in the food.” 58 Fed. Reg. 2302, 2407 (Jan. 6, 1993). The FDA asserted that because of its limited resources (and other priorities), it would not establish a definition for “natural” at that time. (The U.S. Department of Agriculture has regulated the term “natural” but only as applied to poultry and other meats.) The FDA stated that it would continue to distinguish between natural and artificial flavors, but it otherwise would not restrict the use of “natural” except for added color, synthetic substances, and flavors. See 21 C.F.R. § 101.22.

In 2008, in response to an inquiry by the Corn Refiners Association, the FDA stated that a product containing high fructose corn syrup (HFCS) may be labeled “natural” if a synthetic chemical was used during the manufacturing process in certain cases. The FDA evaluated the manufacturing process and determined that while a synthetic chemical facilitated the enzymatic reaction that produced HFCS out of high dextrose equivalent corn starch hydrolysate, the synthetic chemical did not come into contact with the high dextrose corn starch hydrolysate. The FDA therefore concluded that the chemical would not be considered to be included in or added to the HFCS. Because HFCS is made from corn, a natural grain product, the FDA found that the HFCS could be “natural.” The FDA indicated, however, that it would object to the use of “natural” for a product containing HFCS if a synthetic substance had been included in or added to it, or infused synthetic chemicals were used to obtain the starch hydrolysate. As such, a case-by-case analysis is necessary to determine whether a product is “natural.”

More recently, the FDA has sent “warning letters” to food producers, advising that their products labeled as “all natural” were misbranded as they contained various synthetic chemical preservatives and thus violated the Federal Food, Drug, and Cosmetic Act. See 21 U.S.C. § 343(a)(1). In those letters, the FDA cited its interpretation in the federal regulations; that is, the use of the term “natural” on a food label is truthful and non-misleading only when nothing artificial or synthetic has been included in, or added to, a food that would not normally be expected to be in the food. For example, the FDA sent a March 11, 2011, warning letter to a juice manufacturer, asserting that the juice product was misbranded for containing “sodium benzoate 1%” [sic], a synthetic chemical preservative. The FDA also sent a similar warning letter to another food manufacturer indicating that the company’s “all natural” product was misbranded because it contained disodium dihydrogen pyrophosphate, which is also a synthetic chemical preservative. The FDA advised that failure to comply could result in an enforcement action without further notice.

Recent Developments
During the last two years, numerous class actions have been filed against food producers, alleging that food product labels falsely and misleadingly stated that the foods were “all natural.” These actions, often filed in California federal courts, have implicated a wide variety of products ranging from beverages to chips to granola bars. The long list of alleged synthetic ingredients have included alkalized cocoa, ascorbic acid (vitamin C), beta-carotene (vitamin A), calcium pantothenate (vitamin B5), citric acid, cyanocobalamin, folic acid (a B vitamin), glycerin, inulin, niacinamide, potassium carbonate, potassium iodide, pyridoxine hydrochloride, riboflavin, sodium benzoate, soy lecithin, steviol glycosides, xanthan gum, and zinc oxide. The use of genetically modified organisms has also led to many similar lawsuits.

In general, plaintiffs base their lawsuits on the principles that they did not receive the all-natural food that they wanted and that the foods were more expensive than similar products in the market. They specifically assert claims including false advertising, unfair competition, deceptive trade practices, negligence, breaches of warranty, and violation of the Magnuson-Moss Act, and violation of corresponding state statutes including the California Consumer Legal Remedies Act. Common-law claims also arise based on the allegation that a food label failed to warn about a safety issue with the alleged synthetic ingredient. As a result of those claims, plaintiffs often seek economic damages, attorney fees, costs, punitive damages, and injunctive relief, typically a court order requiring that the allegedly deceptive or misleading terms be removed from the food labels. One recent putative class action arising out of fruit-smoothie kits also sought injunctive relief in the form of a corrective advertising campaign.

Defendants have potential defenses to these claims. One is preemption. Specifically, food producers have obtained dismissals of state-law claims, arguing that the Nutrition Labeling and Education Act (NLEA), which amended the Food, Drug, and Cosmetic Act, preempts any state law requiring labeling that is not identical to the federal requirements. The U.S. Court of Appeals for the Seventh Circuit recently affirmed a preemption-based dismissal, finding that NLEA prevents label disclosures beyond the federal requirement. See Turek v. General Mills, 662 F.3d 423 (7th Cir. 2011) (where the plaintiffs sought disclosures that the fiber in bars was not “natural”). Not all courts have taken that approach, however. Seee.g., Holk v. Snapple Beverage Corp., 575 F.3d 329, 339–41 (3d Cir. 2009); Lockwood ConAgra Foods, Inc., 597 F. Supp. 2d 1028, 1033 (N.D. Cal. 2009) (“The FDA’s ‘policy’ about the use of the word ‘natural’ in a food label also suggests an intent not to occupy the field.”).

In addition to preemption, defendants have also successfully asserted that such claims were insufficiently alleged. For instance, in Wright v. General Mills, Inc., No. 08cv1532, 2009 WL 3247148 (S.D. Cal. Sept. 30, 2009), the court dismissed claims for the plaintiffs’ failure to adequately allege injury-in-fact under the standards of Bell Atlantic Corp. v. Twombley, 550 U.S. 544, 127 S. Ct. 1955 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937 (2009), and for the failure to plead any unlawful business practices with particularity. See alsoWestern Sugar Coop. v. Archer-Daniels-Midland Co., No. 11-3473 (C.D. Cal. Oct. 21, 2011) (dismissing all claims against members of a corn refiner trade association where the trade association, not the members, conducted an advertising campaign that HFCS was natural, and striking the unfair advertising claim against the trade association for failing to present any evidence that the trade association’s statements influenced purchasing decisions or that the plaintiffs suffered any injury). But such dismissals would typically be without prejudice.

Reliance is frequently a dispositive issue in most consumer-fraud claims, and these are no exception. Food producers have obtained dismissal of individual and class claims where they could demonstrate that the consumers did not rely on the alleged misrepresentation. See¸ e.g., Briseno v. ConAgra Foods Inc., No. 11-cv-05379, (C.D. Cal. Nov. 23, 2011) (granting dismissal for failure to plead fraud or mistake with particularity in the absence of allegations regarding the plaintiff’s exposure and reliance on the allegedly misleading statement of “100% natural” cooking oils derived from genetically modified organism seeds).

Obstacles to viable claims include the requirement that plaintiffs present evidence that they paid more for a product as a result of the labeling than they would have otherwise paid for a similar product. See Weiner v. Snapple Beverage Corp., No. 07 Civ. 8742, 2011 WL 196930 (S.D.N.Y. Jan. 21, 2011). The issue of actual damages suffered by a plaintiff may be problematic: The price that a plaintiff would have paid for a non-100-percent-natural product and a natural product may be identical. That evidentiary requirement may similarly defeat the predominance requirement for class certification where there is no way to prove causation and injury on a class-wide basis. See Weiner v. Snapple Beverage Corp., No. 07 Civ 8742, 2010 WL 3119452 *6 (S.D.N.Y. Aug. 5, 2010).

Of course, despite the existence of potentially viable defenses, companies are beginning to settle these claims if they are not dismissed at the outset. One case arising out of ice-cream products settled for $7.5 million in fall 2011. The plaintiffs in the consolidated action asserted claims of unlawful, unfair, and fraudulent business practices, false advertising, common-law fraud, consumer fraud, breach of express and implied warranties, and unjust enrichment based on the use of alkalized cocoa processed with a synthetic ingredient (potassium carbonate) in the products. As part of the settlement, the ice-cream company agreed to stop using “all natural” on its products and to reimburse $2.00 of the retail price per package, up to 10 packages, to each class member who certified having made a purchase with respect to two brands of ice-cream products managed under its corporate umbrella.

As long as food producers continue to include terms such as “all natural” and “100% natural” on their labels and in their marketing, plaintiffs will continue to file class actions challenging them. The use of preservatives, synthetic chemicals, and genetically modified organisms in the production of food renders producers of all types susceptible to these lawsuits. This fact should not serve as a disincentive to the continued development of greener food products; however, companies must be cognizant of the exposure risk and avail themselves of defense strategies to help minimize risk (and to defeat unfounded claims) to the extent possible particularly while uncertainty remains regarding the meaning of “natural.”

Keywords: litigation, consumer rights litigation, all natural, high fructose corn syrup, HFCS, FDA

C. Kinnier Lastimosa is an associate with Sedgwick LLP in Chicago, IL.

Copyright © 2012, American Bar Association. All rights reserved. This information or any portion thereof may not be copied or disseminated in any form or by any means or downloaded or stored in an electronic database or retrieval system without the express written consent of the American Bar Association. The views expressed in this article are those of the author(s) and do not necessarily reflect the positions or policies of the American Bar Association, the Section of Litigation, this committee, or the employer(s) of the author(s).