Food

Pokemon GMO

** Update on the National Bioengineered Food Disclosure Standard Law **

 

closeup of a GMO UPC symbol on white

By a stroke of the pen, President Obama put to rest for all time (by “all time,” we mean a decade) the brouhaha over labeling foods containing GMO ingredients.  By signing the National Bioengineered Food Disclosure Standard law on July 29, 2016, the President and Congress proclaimed to the citizenry that GMO labeling is important — but not so important that the labels actually have to be seen.  How did we get to this point?  A brief history is in order.

When one of the editors of this blog watches Netflix with his English Bulldog, he is enjoying the companionship of a genetically modified organism (“GMO”).  Long before the first GMO food – the Flavr Savr tomato — hit grocery store shelves in 1994, humans were engineering crops and livestock the old fashioned way – selective breeding.  Modern GMOs, of course, differ from those derived from selective breeding.  They are developed on a molecular level – a specific gene from a donor organism that expresses a desirable trait is inserted into the genome of the target organism to give the latter that same trait.  While consumer organizations and environmental activists have sounded the tocsin (or toxin) over GMOs since the beginning of bio-engineering, the federal government – particularly the FDA – has not been alarmed.

Two years before Flavr Savr, the FDA published its “Statement of Policy:  Foods Derived from New Plant Varieties.”  In this document, the FDA reminded the public that a food additive must be approved prior to use unless it is “generally recognized as safe” (GRAS).  The FDA concluded that, while a plant gene inserted into another plant is an additive, generally that gene is GRAS.  “The agency is not aware of any information showing that foods derived by these new methods differ from other foods in any meaningful or uniform way, or that, as a class, foods developed from the new techniques present any different or greater safety concern than foods developed by traditional plant breeding.”  Based on that logic, the FDA’s regulations for plant GMOs are the same as those for traditional foods with the exception of a voluntary (“recommended”) consultation procedure with which developers of GMO-containing foods typically comply.  (Note that the USDA’s Animal and Plant Health Inspection Service plays a limited regulatory role with regard to GMOs that pose a risk to other plants or animals and the EPA regulates GMOs that are bio-engineered to produce a pesticide – for example, the infamous, but unblemished, Bt-corn.)

In the 1992 Policy, the FDA eschewed requiring food companies incorporating plant GMOs to label their products as such under the Federal Food, Drug, and Cosmetic Act because “the agency does not believe that the method of development of a new plaint variety (including recombinant DNA techniques) is normally material information within the meaning of 21 U.S.C. 321(n).”  The FDA has not deviated from this position in the past quarter decade.  The agency’s website has a page directed to consumers which rhetorically asks, “Are foods from GE plants safe to eat?”  The response is, “Yes.  Credible evidence has demonstrated that foods from the GE plant varieties marked to date are as safe as comparable, non-GE foods.”

The FDA’s refusal to mandate that food companies label their products containing GMOs does not mean that consumers who care about such things have been stymied.  In 1990, Congress enacted and George Herbert Walker Bush signed the Organic Foods Production Act, which required that the USDA develop national standards for organic products.  Ten years later, the USDA issued its final rule establishing the National Organic Program (NOP), which governs both fresh and processed food products, including crops and livestock.  The “USDA Organic” label means many things under the NOP — but one of them is no genetic engineering.  GMOs are prohibited in organic products as excluded methods of production.  7 CFR § 205.105.  Therefore, a consumer that doesn’t want to ingest a GMO need only look for the “USDA Organic” label.

The NOP was not enough for Vermont.  In 2014, Vermont enacted Act 120 – a manifesto against the federal government’s oversight of GMOs — that required labels on products containing genetically engineered ingredients.  “[F]ood offered for sale by a retailer after July 1, 2016 shall be labeled as produced entirely or in part from genetic engineering if it is a product:  (1) offered for retail sale in Vermont; and (2) entirely or partially produced with genetic engineering.”  Act 120, § 3043.  In addition, “a manufacturer of a food produced entirely or in part from genetic engineering shall not label the product on the package, in signage, or in advertising as ‘natural,’ ‘naturally made,’ ‘naturally grown,’ ‘all natural,’ or any words of similar import that would have a tendency to mislead a consumer.”  Id.

The food industry went into an uproar over Vermont’s law because – given the realities of interstate commerce – companies would have to change their labeling nationwide to satisfy the demands of Vermont.  While manufacturers have had to bend to the legislative will of California from time to time (“Made in the USA”/Prop 65), it’s quite another thing to answer to Vermont.

Due, in part, to persistent lobbying, Congress enacted the Bioengineered Food Disclosure Standard law just in time to pre-empt Vermont’s organic labeling law from going into effect.  The law requires that the USDA “establish a national mandatory bioengineered food disclosure standard with respect to any bioengineered food and any food that may be bioengineered” by July 2018.  Therefore, GMO labeling will be required nationwide sometime after 2018.  But because Congress clearly believes that this law is a solution in search of a problem, the statute has a unique labeling provision that “require[s] that the form of a food disclosure under this section be a text, symbol, or electronic or digital link . . . with the disclosure option to be selected by the food manufacturer.”  What does this mean?  Simply put, food companies will have the option of either a product label with a bar code accompanied by the words, “scan here for more food information” or a toll-free telephone number with “call for more food information.”  In short, an actual GMO disclosure on the label is not required.  Consumers who care will roam supermarket aisles – smart phones in front of their faces – scanning bar codes to find their non-GMO groceries like Pokemon Go zombies looking for Poke Balls.

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Sugar By Any Other Name Not Just As Sweet – Says FDA

** FDA concludes its study on “Evaporated Cane Juice” – issues guidance that it is a misleading description for mere Sugar **                                                                                                                                                                                                                

Candy shop at local bazaar in Barcelona, Spain.

On May 25, 2016, the Food and Drug Administration (FDA) issued guidance that it is false or misleading to describe sweeteners made from sugar cane as “evaporated cane juice.” Guidance for Industry: Ingredients Declared as Evaporated Cane Juice.

The FDA promised guidance before the end of 2016 – so they under-promised and over-delivered.  The FDA’s guidance reasoned that the term “cane juice”— as opposed to cane syrup or cane sugar—calls to mind vegetable or fruit juice, see 21 CFR 120.1(a), which the FDA said is misleading as sugar cane is not typically eaten as a fruit or vegetable.  See U.S. Department of Agriculture, Center for Nutrition Policy and Promotion. “Added Sugars.”  As such, the FDA concluded that the term “evaporated cane juice” fails to disclose that the ingredient’s “basic nature” is sugar. Guidance, Section III.  As support, the FDA cited the Codex Alimentarius Commission — a source for international food standards sponsored by the World Health Organization and the United Nations — which defines “raw cane sugar” in the same way as “evaporated cane juice.” Codex 212-1999.1.  The FDA therefore advised that “‘evaporated cane juice’ is not the common name of any type of sweetener and should be declared on food labels as ‘sugar,’ preceded by one or more truthful, non-misleading descriptors if the manufacturer so chooses.” Guidance, Section III.  The FDA’s decision comes after a 2009 draft guidance advising against using the term “evaporated cane juice” and a host of lawsuits against food companies that ignored the guidance.  Draft Guidance for Industry: Ingredients Declared as Evaporated Cane Juice (2009).

The FDA’s decision does not bode well for pending cases on this point.  As we have blogged about recently, many evaporated cane juice lawsuits are currently stayed awaiting the outcome of the FDA’s guidance, see, e.g., Gitson, et al. v. Clover-Stornetta Farms, Inc., Case No. 3:13-cv-01517-EDL (N.D. Cal. Jan. 7, 2016); Swearingen v. Amazon Preservation Partners, Inc., Case No. 13-cv-04402-WHO (N.D. Cal. Jan. 11, 2016).  And some have been revived on appeal – just in time – see Kane v. Chobani, LLC, No. 14-15670, 2016 WL 1161782, at *1 (9th Cir. Mar. 24, 2016) (overturning 2014 order from Northern District of California dismissing case).  These suits (and others) are now set to proceed in the wake of the FDA’s guidance.  Bear in mind, the guidance is not binding on courts and, in of itself, does not create a private right of action.  21 U.S.C. § 337(a) (“[A]ll such proceedings for the enforcement, or to restrain violations, of [the FDCA] shall be by and in the name of the United States”); see POM Wonderful LLC v. Coca-Cola Co., 573 U.S. ___ (2014); Buckman Co. v. Pls.’ Legal Comm., 531 U.S. 341, 349 n.4 (2001); Turek v. Gen. Mills, Inc., 662 F.3d 423, 426 (7th Cir. 2011); see also Smith v. U.S. Dep’t of Agric., 888 F. Supp. 2d 945, 955 (S.D. Iowa 2012) (holding that there is no private right of action regarding USDA statute).

In most false advertising cases, the governing test is what consumers, themselves, think – not what the FDA does.  For example, in Mason v. Coca-Cola Co., plaintiffs alleged that “Diet Coke Plus” was misleading because the word “Plus” implied the product was “healthy” under FDA regulations.  774 F. Supp. 2d 699 (D.N.J. 2011).  The court begged to differ: “At its core, the complaint is an attempt to capitalize on an apparent and somewhat arcane violation of FDA food labeling regulations . . .  not every regulatory violation amounts to an act of consumer fraud . . . . It is simply not plausible that consumers would be aware of [the] FDA regulations [plaintiff relies on].”  Id. at 705 n.4; see also Polk v. KV Pharm. Co., No. 4:09-CV-00588 SNLJ, 2011 WL 6257466, at *7 (E.D. Mo. Dec. 15, 2011);  In re Frito-Lay N. Am., Inc. All Natural Litig., No. 12-MD-2413 RRM RLM, 2013 WL 4647512, at *15 (E.D.N.Y. Aug. 29, 2013) (“[T]he Court [cannot] conclude that a reasonable consumer, or any consumer, is aware of and understands the various federal agencies’ views on the term natural.”)  Defendants in evaporated cane juice cases often assert that “evaporated cane juice” is a more accurate term than sugar to describe a type of sweetener that is made from sugar cane but undergoes less processing than white sugar.  See e.g., Morgan v Wallaby Yogurt Company, No. CV 13-0296-CW, 2013 WL 11231160 (N.D. Cal, April 8, 2013) (Mot. to Dismiss).  Those issues aside, many commentators believe the guidance will spur settlements – and they may be right.  The guidance may also spur a round of label changes for those who have not already abandoned the controversial term.

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Enhanced Food Labelling Guidelines

** FDA refreshes its Nutrition Facts label for packaged foods  **                                                                                                                                                      

Corn on spoon

On May 27, 2016, the FDA updated its “nutrition facts label” rule for packaged food products sold in the US.  See 81 FR 33741, 21 CFR 101.  The stated goal of the rule-making is to provide “updated nutritional information for most packaged foods sold in the United States, that will help people make informed decisions about the foods they eat and feed their families.

The new Nutrition Facts label will maintain its traditional look and feel, but will be updated to include, amongst other things:

  • A new design increasing the type size for “Calories,” “servings per container,” and the “Serving size” declaration, and bolding the number of calories and the “Serving size” declaration to highlight this information.
  • A mandatory footnote explaining “*The % Daily Value tells you how much a nutrient in a serving of food contributes to a daily diet. 2,000 calories a day is used for general nutrition advice.”
  • New requirements for “Added sugars” to be listed both in grams and as percent Daily Value.
  • New mandatory nutrients are included – Vitamin D and potassium are now required – and the rule drops the requirement for Vitamins A and C to be listed (which research has shown very few people are deficient in).
  • Removal of the “Calories from Fat” line item (as research shows that the type of fat is more important than the amount) – the requirement to list “Total Fat,” “Saturated Fat,” and “Trans Fat” remain.
  • In line with new research that indicates that prior “serving size data” underestimates the typical amount consumed, the rule updates the reference amount for different types of foods – for example, the reference amount used to set a serving of ice cream was previously ½ cup but is changing to ⅔ cup. The reference amount used to set a serving of soda is changing from 8 ounces to 12 ounces.
  • And where a products is larger than the reference size for a single serving – but where the item could be consumed in one sitting or more multiple sittings — manufacturers will need to provide “dual column” labels to indicate the amount of calories and nutrients on both a “per serving” and “per package”/“per unit” basis.

A comparison between the original vs. the new labels makes the effect of the changes clear:

lable 

Most food manufacturers will be required to use the new label by July 26, 2018.  However, manufacturers with less than $10 million in annual food sales will have an additional year to comply.

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Ice Ice (Baby)

** Purported Class Action Attempts to Sink Starbucks with claims over allegedly misleadingly frozen water **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

danger thin ice - warning sign by a lake

Last week, a disgruntled Starbucks patron in Chicago filed a putative class action against the coffee icon in the Northern District of Illinois claiming that consumers like her have been defrauded over the past ten years by big plastic cups of ice.  Pincus v. Starbucks Corporation, 1:16-cv-04705 (N.D. Ill. April 27, 2016) (Dkt. No. 1).  Granted, all of the drinks that are part of the lawsuit are called “Iced Something-Or-Other,” but according to the Plaintiff that doesn’t justify Starbucks putting ice in the beverages.  Okay, that’s overstating it a bit.

The lawsuit hinges on Starbucks’ use of the acronym for fluid ounce (“fl. oz.”) on its menus and in other advertising.  Plaintiff contends that “fl. oz.” means just that – an ounce of fluid – and the actual fluid ounces in Starbucks iced drinks are less than those claimed in its advertising.  It is only by putting pre-measured scoops of ice in the drinks that the nefarious Starbucks baristas are able to completely fill those ubiquitous transparent cups.  Starbucks, of course, is behind the whole scheme supplying the baristas with beverage cups with fill-lines printed on them (product/water or lemonade/ice) as well as different size ice scoopers (Tall/Grande/Venti).  Plaintiff claims that she, and millions of other Starbucks aficionados across the United States, relied on the Company’s representations about the number of fluid ounces in their drinks and “Plaintiff would not have paid as much, if anything for the Cold Drinks had she known that it [sic] contained less, and in many cases, nearly half as many, fluid ounces than claimed by Starbucks.”

“Ounce” is Middle English from the Anglo-French “unce” and is a unit of mass equal to 1/16 of an avoirdupois pound and 1/12 of the troy pound favored by precious metal dealers.  More importantly, an ounce is 0.666682 of a jigger of Jim Beam.  Accordingly, any class certified in this case must certainly exclude gold investors and may need to be limited to hard core drinkers who know what an ounce looks (and feels) like.  But while the public may have some difficulty visually identifying an ounce, they certainly know the difference between a Grande and a Venti, which is, after all, what they’re buying.

Plaintiff’s class definition is “[a]ll persons in the United States of America who purchased one or more of Defendant’s Cold Drinks at any time between April 27, 2006 and the present.”  “Cold Drinks”  include, but are not limited to, “iced coffee, shaken iced tea, shaken iced tea lemonade, Refreshers®, and Fizzio™ handcrafted sodas” (which, as an aside, are sadly not available at all Starbucks locations – but for those in the right locale, our pro tip is the Golden Ginger Ale).  Although both cold and a drink, the Frappuccino® is not included.  And that’s the whole problem with this case, isn’t it?

The Frappuccino® contains plenty of ice.  But because the ice is blended with the flavored ingredients, it apparently qualifies as a liquid even though it’s really tiny shards of ice.  Which raises the questions:  If the ice melts in a Starbucks Iced Coffee before the purchaser finishes drinking it, is the purchaser getting the advertised number of fluid ounces?  What if the purchaser is an ice chomper?  Plaintiff’s complaint shrewdly anticipates these defenses.  First, Starbucks uses “large pieces of ice” that “take up more space and thus when melted, will yield fewer measured ‘fluid’ ounces of coffee or tea . . . .”  (Starbucks is skimping on the water!)  More broadly, Plaintiff declares that “a reasonable consumer does not wait for the ice in a Cold Drink to melt before consuming the Cold Drink.”  This point, of course, will require survey evidence to establish — or perhaps the class can be limited to purchasers of Starbucks Cold Beverages who are not sippers or chompers.  (Ascertainability might be a problem here.)

Starbucks suffers from its transparency (which is the opposite of the problem it faced in a now dismissed slack fill case against it filed in New York).  Anyone who purchases an iced beverage for the first time – particularly a shaken iced tea, a Refresher® or a Fizzio™  – is startled when the barista pours such a small amount of the flavored stuff in the bottom of one of those big plastic cups and then tops it off with water (or lemonade) and finally, a huge mound of ice.  A Diet Coke from the McDonald’s drive-thru window retains its mystery.  How much syrup?  How much ice?  But for those who love Starbucks, the beverages are consistently great – a treat to be savored slowly . . . while the triple-filtered ice melts.

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Au Naturale

** How can we “Know It When We See It” to divine when the FTC will label an all natural claim misleading? **                                                                                                                                                                                                                                                                                                                                                                               

On April 12, 2016, the Federal Trade Commission (“FTC”) announced proposed settlements with four skin care, shampoo and sunscreen companies over the use of the term, “natural” in their product labeling and advertising (ShiKai, Rocky Mountain Sunscreen, EDEN BodyWorks, and Beyond Coastal products).  The FTC issued an administrative complaint against a fifth skin care company making similar claims.  The gravamen of each of these actions is the FTC’s assertion that the companies’ products “are not ‘all natural’ because they contain[ ] or contained at least one synthetic ingredient.”  The FTC’s Director of the Bureau of Consumer Protection, in announcing the settlements, proclaimed, “’All natural’ or ‘100 percent natural’ means just that — no artificial ingredients or chemicals.”  “Companies should take a lesson from these cases.”

But what exactly is that lesson?  To answer that – lets recall the history of federal “natural” regulations (or more accurately, the lack thereof).  The Food & Drug Administration (“FDA”) is the primary federal agency responsible for the labeling of food, drugs and cosmetics sold in the United States to, among other things, prevent consumer deception.  21 U.S.C. § 331(a).  Three of the five companies sued by the FTC sell “drugs” (sunscreen).  So what is the FDA’s position on “natural”?  As we’ve blogged about before, the FDA has repeatedly demurred on the question asserting that “priority food public health and safety matters are largely occupying the limited resources that FDA has to address food matters.”  Letter from Leslie Kux, Assistant Commissioner for Policy Food and Drug Administration, to Judges Gonzalez Rogers, White, and McNulty, January 6, 2014 (responding to the question of whether GMO seed used to grow corn rendered the corn unnatural).  The FDA, from time to time, has relied on its 1991 “informal policy” of defining “natural” for food for human consumption “as meaning 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 to be in the food.”  56 Fed. Reg. 60421, 60466-60467 (Nov. 27, 1991).  For example, in a November 16, 2011 Warning Letter to Alexia Foods, the FDA asserted that the company had misbranded its mushrooms and red potatoes as “All Natural” when they contained disodium dihydrogen pyrophosphate — a synthetic chemical preservative.

Very recently, as we’ve also posted about, the FDA has requested public comment on a possible definition of “natural” for food labeling signaling that the FDA may be ready to issue some sort of concrete “natural” rule in the near future, at least as the term applies to food.  It will be interesting to see if things have changed since 1991, when the FDA, in assessing the possibility of consumer confusion, concluded that “natural” was already in “widespread use” “on a variety of products to mean a variety of things” with “consumers regard[ing] many uses of th[e] term as non-informative.”  56 Fed. Reg. 60421, 60466.

Unlike the FDA, the U.S. Department of Agriculture’s (“USDA”)  rules on “natural” for meat and poultry appear quite definitive.  According to the USDA’s Food Standards and Labeling Policy Book, “natural” means “(1) the product does not contain any artificial flavor or flavoring, coloring ingredient, or chemical preservative (as defined in 21 CFR 101.22), or any other artificial or synthetic ingredient; and (2) the product and its ingredients are not more than minimally processed.”  Is this a “bright line” test?  Not really.  The USDA Policy Book states that “Relatively severe processes, e.g., solvent extraction, acid hydrolysis, and chemical bleaching would clearly be considered more than minimal processing.”  Okay, so no “relatively severe processes.”  But it also states. . . “the presence of an ingredient which has been more than minimally processed would not necessarily preclude the product from being promoted as natural . . . if it can be demonstrated that the use of such an ingredient would not significantly change the character of the product to the point that it could no longer be considered a natural product.”  Oh.

In the end, the USDA relies on disclosure to alleviate consumer confusion.  The Policy Book states:  “All products claiming to be natural or a natural food should be accompanied by a brief statement which explains what is meant by the term natural, i.e., that the product is a natural food because it contains no artificial ingredients and is only minimally processed. This statement should appear directly beneath or beside all natural claims or, if elsewhere on the principal display panel; an asterisk should be used to tie the explanation to the claim.”  Because the USDA’s Food Safety and Inspection Service must approve all meat and poultry product labels before they are placed on store shelves, any issues over the nuances of whether a product is “natural” are worked out on the front end.

Brief philosophical interlude:  The USDA’s definition of “natural” has little or nothing to do with consumer health – a smoked meat (thought by some to expose consumers to carcinogens) is “natural” but a meat that undergoes relatively benign acid hydrolysis to round out flavor and break down proteins so they are more easily digested is unnatural.  But if a consumer equates “natural” with “wholesome” (the FDA’s term) or “healthy,” does the USDA’s “natural” rule help consumers at all?

This brings us to the FTC – the agency with the longest history of not making rules on “natural” claims.  “On December 17, 1982, the Commission decided to terminate its proposed trade regulation rule on food advertising.  The proposed rule would have regulated energy and weight control claims, fatty acid and cholesterol claims, and natural food claims.”  48 Fed . Reg. 23270 (May 24, 1983) (emphasis added).  This avoidance has continued unabated, up to and including the FTC’s revisions to the Green Guides governing environmental marketing claims.  “The final Guides do not address organic, sustainable, and natural claims. . . .  For . . . sustainable and natural claims, the Commission lacks sufficient evidence [presumably of what consumers think “natural” means] on which to base general guidance.”  16 CFR Part 260 (Oct. 6, 2010).

Of course, the FTC has long maintained that it has the right, on a case-by-case basis, to take enforcement actions against companies that use “natural” deceptively.  48 Fed . Reg. 23270 (May 24, 1983).  But in the absence of an actual rule, the FTC is relying on the Potter Stewart pornography principle  — “it know it when it sees it.”  Jacobellis v. Ohio, 378 U.S. 184 (1964).  That’s fine, but, under those circumstances, it is difficult for companies “to take a lesson” from the FTC’s five recent enforcement actions other than that the FTC doesn’t want to see chemicals in natural products.

But maybe that isn’t even true.  The proposed settlements that the FTC announced on April 12th appear on the surface to be easy ones – the challenged products contain substances with chemical-sounding names like Dimethicone, Polyethylene, Butyloctyl salicylate, Neopentyl glycol Diethylhexanoate, Ethylhexyl glycerin, Phenoxyethanol, Polyquaternium-7 and/or Caprylyl glycol.  The only public statement from one of the settling companies who sells sunscreen attributed its natural labeling to a mistaken belief that it could make the claim if the active ingredients were natural.  But is important to observe that the FTC complaint against the single settlement hold out, California Naturel, is much narrower than the other complaints citing to only one “synthetic ingredient” – dimethicone – in a single product – Sunscreen SPF 30 – despite the fact that California Naturel (according to its beautifully designed website) sells a variety of skin care products that include numerous substances that have chemical-sounding names (e.g., Polyglyceryl-3 polyricinoleate – “an emulsifier made from glycerol and fatty acids”). California Naturel takes care on its website to explain when its ingredients are “extracted,” or “derived from” natural sources, but does the extraction or derivation processes render the ingredients “synthetic”?  Apparently not.

So here we are – waiting for the FDA to maybe shed some light on what “natural” really means.  But it is certainly understandable why the agency, as well as the FTC, have hitherto been reluctant to make a call on the issue.  And whatever rule the FDA publishes, we must bear in mind its own admonition back in 1991 — “natural” “mean a variety of things” with “consumers regard[ing] many uses of th[e] term as non-informative.”  Will the FDA’s pronouncement distill the essence of consumer understanding on the subject (if it even exists) or will it simply be a set of rules?  If not the former, perhaps it’s better for the FTC and the FDA to continue to rely on the Potter Principle.

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A Poker Lesson From The Pom Wonderful v. Coca-Cola Co. Cases

iStock_000014677000_Medium

 

** Coca Cola Prevails in false Advertising Case Bought By Pom Wonderful – Trying to Protect its Pomegranate Juice Market – While at the Same Time Settling Class Actions **                                                                                                                                                                                                                                                            

Pom Wonderful lost its 7 1/2 year battle against Coca-Cola this week after a nine person jury in California found that Coke was not misleading consumers with its Minute Maid division’s “Pomegranate Blueberry Flavored Blend of 5 Juices” which contained only a half-percent of pomegranate and blueberry juice.  Pom Wonderful LLC v. The Coco-Cola Co., No. cv-08-06239-SJO (MJWX) (C.D. Cal. March 21, 2016) (Dkt. 732). Pom had argued that the product’s labeling, which included pictures of all five fruits with the pomegranate dominating (although the apple was pretty darn big too) and the fact that “Flavored Blend of 5 Juices” was in smaller print below “Pomegranate Blueberry” was intended to “hoodwink” consumers into believe that pomegranate and blueberry juices were significant components of the product.  In addition, Pom pointed to the color of Minute Maid’s juice in its clear plastic bottles, which resembled pomegranate juice (i.e., red).  Pom’s attorneys told the jury that Coke leached off of the hard work and money that Pom had invested in growing the pomegranate juice market by creating a cheap juice that Pom’s customers would be tricked into buying due to the cost differential and the belief that they were getting the healthy benefits of pomegranate juice.  Pom sought $77.6 million in lost profits.

Coke’s principal defense was simple — it’s label was accurate and complied with FDA guidelines.  However, it is worth noting that Coke recently settled – subject to preliminary and final court approval — a putative consumer class action, Niloofar Saeidian v. The Coca Cola Company, Case No. 09-cv-06309, which was filed in the Central District of California approximately one year after Pom filed its lawsuit and which made the same deceptive labeling allegations on behalf of a nation-wide class of consumers who purchased the juice.  Interestingly, both the Pom and Saeidian cases are before Judge S. James Otero.  The proposed class action settlement provides for full refunds to class members with proof of purchase (uncapped) and up to two vouchers for replacement products in Coke’s Minute Maid, Simply, Smartwater, Vitaminwater, Vitaminwater Zero, and Honest Tea brands (capped at 200,000 on a “first come, first served” basis).  Coke also agreed to pay the administrative costs of the settlement (est. $400,000), attorney fees and costs not to exceed $700,000, a $5,000 incentive payment to Mr. Saeidian, and to donate $300,000 in product to Feeding America.  Finally, during the pendency of the class action (and the Pom case for that matter), Coke discontinued Minute Maid’s Enhanced Pomegranate Blueberry Flavored Blend of 5 Juices and represented in the settlement that it has no plans to reintroduce it.  Niloofar Saeidian v. The Coca Cola Company, No. 09-cv-06309, (C.D. Cal. Feb. 26, 2016) (Dkt. 192).

Does Coke regret settling the class action lawsuit less than a month before its triumph in Pom?  The difference between the results highlights the stark differences between consumer class actions and Lanham Act false advertising cases.  The latter, especially those not involving negative advertising – are notoriously hard on plaintiffs.  First, surveys show that juries say they read labels – word for word – (see Persuasion Strategies National Jury Survey, 2015).  It thus an uphill battle to convince them they have been misled by a label.  Second, if a company dishes it out, it will almost surely have to take it (nobody’s ads are perfect after-all). In Pom, Pom Wonderful’s claim of misleading labeling was met by Coke asserting “unclean hands” — pointing the jury to an 2012 administrative law judge’s decision in a case brought by the FTC against Pom that Pom made unsubstantiated claims that its juice treated, prevented or reduced the risk of heart disease, prostate cancer, and erectile dysfunction (upheld by POM Wonderful, LLC v. F.T.C., 777 F.3d 478 (D.C. Cir. 2015)).  This is likely a second critical underestimate of jurors’ typical behavior that worked against Pom. Most jurors react predictably to a party’s perceived hypocrisy. Third, most advertisements aren’t blatantly (legal term: “ literally”)  false so the question of whether an ad or label is materially deceptive comes into play.  Experts are hired to present bone dry surveys of consumer behavior, markets and perceptions of the offending ad that are subject to methodology challenges and sometimes clash with jurors’ own perceptions:  “Why do we need an expert? Everybody knows what that means?”  These experts’ opinions even conflict with the company’s own beliefs from time to time.  Indeed, Coke’s counsel’s closing argument mocked Pom’s assertion that Minute Maid’s juice stole customers from Pom by quoting from some early “creative briefs” prepared by Pom’s marketing department that Pom’s target audience for certain ads was “health-conscious hypochondriacs,” juxtaposing that audience with Minute Maid’s target market — regular old families.  And fourth, even if a corporate plaintiff successfully navigates these tough proof issues, it is left with the daunting task of proving that it suffered actual injury from its competitor’s ad and the amount of that injury in dollars – no easy task in multi-competitor markets that suffer the slings and arrows of shifting consumer tastes, new market entrants, the next “new thing,” and the fluctuation of the economy as a whole.  Frequently, defense counsel in Lanham Act cases are willing to just poke holes in plaintiffs’ experts’ damage analyses through cross-examination and possibly their own experts’ critiques without proffering alternative damage calculations on the theory that offering alternative numbers is a tacit admission of liability and creates a floor.  Coke eschewed this approach and called an expert who testified that, even accepting some of Pom’s forensic accountant’s premises, Pom’s damages would only be between $886,000 and $9.8 million – not $77.6 million (see also this post on the strategy for damages anchors).  In the end, that tactical decision didn’t matter.  In less than a day of deliberations, the jury determined that Coke’s blended juice did not mislead consumers about the amount of pomegranate juice in the bottle.  Pom Wonderful LLC v. The Coco-Cola Co., No. cv-08-06239-SJO (MJWX) (C.D. Cal. March 21, 2016) (Dkt. 732).

One can assume that Pom went into this Lanham Act lawsuit against Coke with eyes wide open.  Clearly Pom is sincere in its view that its hard work and research funding created the explosive growth in consumer demand for pomegranate juice and its market should not be hijacked by impostors.  Pom had previously been to trial against Ocean Spray and Welch’s making similar Lanham Act claims to the ones asserted against Coke.  In the Ocean Spray case, a two-week trial in the Central District of California at the end of 2011 resulted in a jury verdict that Ocean Spray did not deceptively advertise its “100% Juice Cranberry and Pomegranate” juice after two hours of deliberation.   Pom Wonderful LLC v. Ocean’s Spray Inc., No. 2:09-cv-00565-DDP-R2 (C.D. Cal. Dec. 2, 2011) (Dkt. 552). The Welch’s case proved a pyrrhic victory for Pom – the Central District of California jury found in 2010 that Welch’s labeling of its juice as “100% Juice White Grape Pomegranate” was literally true but nevertheless deceptive yet concluded that Pom was unable to prove any injury.  Interestingly, Welch’s – like Coke – settled two consolidated consumer class action lawsuits making the same claims as Pom five months after its victory over Pom. Pom Wonderful LLC v. Welch Foods Inc., No. 2:09-cv-00567-AHM-AGR (C.D. Cal. Sept. 13, 2010) (Dkt. 374).

In the end, the problem with Pom’s Lanham Act lawsuits – like many such cases – may be the plaintiff.  Jurors are asked to find that the defendant deceived consumers, but then give the money to a competitor – not a particularly satisfying result.  This is obviously not a problem in consumer class actions.  In a Lanham Act case, if the advertising is negative and directly pointed at the competitor or if the advertisement is particularly naughty – for example, Blue Buffalo’s trumpeting that its premium priced dog food contained no byproducts when the company knew that it did (lesson: don’t mess with man’s best friend) – a jury will likely find liability and damages.  But in the more common “literally true but deceptive” case, Lanham claims are a hard sell.  In the triad of Pom cases, the only one in which actual consumers testified as to deception was Welch’s, which might have had something to do with the jury’s finding of deception.                                                                                                                                                                                                             

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No Parm, No Foul?

** Class actions Filed Following Bloomberg Reports of Cellulose Filling in Parmesan Cheese **                                                                                                                                                                                                                                                       iStock_000015614674_Medium Two putative class action lawsuits have been filed over cellulose in parmesan cheese – one in federal court in New York against Wal-Mart (Moschetta v. Wal-Mart Stores, Inc., S.D.N.Y., No. 16-13770) and one in the Northern District of California against the newly merged Kraft Heinz group (Lewin v. Kraft Heinz Foods Co., 316-cv-00823).  Plaintiffs’ counsel wasted no time filing their lawsuits after Bloomberg Business published a February 16, 2016 online article regarding the common practice of cheese makers adding cellulose (plant pulp) to grated parmesan cheese.  Bloomberg had various brands of grated parmesan tested by an independent laboratory and reported the results of at least some of those tests — Essential Everyday 100% Grated Parmesan Cheese sold by Jewel-Osco tested at 8.6% cellulose, Wal-Mart’s Great Value 100% Grated Parmesan weighed in at 7.8% cellulose, and the ubiquitous Kraft 100% Grated Parmesan Cheese registered 3.8%.  Some grated parmesan makers list cellulose as an ingredient on their labels as an additive “to prevent caking.”  The FDA has no specific regulations regarding the amount of cellulose in grated cheeses (and most other foods), and it is a common food additive — cutting calories (it’s non-digestible), reducing fat content, and providing a source of dietary fiber.

While it is unclear what prompted Bloomberg to commission the lab tests, they came in the wake of a federal criminal prosecution of the now-defunct Castle Cheese Inc. and its CEO, Michelle Myrter, on food adulteration and misbranding charges.  Castle Cheese, however, was a different beast altogether where the problem was not only the addition of cellulose, but the fact that its parmesan cheese did not contain any parmesan at all (rather, a combination of Swiss, white cheddar, Havarti, and mozzarella – sometimes from the rinds).  A ex-employee blew the whistle on Castle, which was investigated by the FDA in 2014.  Castle declared bankruptcy shortly thereafter.

The U.S. parmesan business seems beset on all sides by detractors.  The  Italian Parmigiano Reggiano Consortium recently published the results of a consumer survey it commissioned that purportedly showed that Americans who viewed a package of parmesan cheese that “recalled” an Italian flag believed that Italy was the country of origin for that cheese and, even in less suggestive packaging, 38% of those surveyed believed the cheese to have been made in Italy.  The Italian consortium is taking its complaint that U.S. consumers are being duped into buying parmesan they believe is made in Italy to Brussels in the hope that they will be dealt with in the Transatlantic Trade and Investment Partnership trade agreement (T-TIP).  Currently, cheese makers are prevented under European Union protected designations of origin regulations (“PDOs”) from labeling their cheeses as parmesan if they are not made by dairies in Parma, Reggio Emilia, Modena and parts of the provinces of Mantua and Bologna.  If this regulation was “imported” into the US, would the millions of 4-17 year olds who dump the off-white powder onto their noodles take note?

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