FDA

No Pay, No Play

** District Court Rejects Settlement Deal That Extracts a Broad Release of Claims But Provides No Money to Class Members **

By: Brent E. Johnson

Pay writing on Keyboard

It is not common for judges to reject class settlements, usually because lawyers for the opposing sides — putting aside their adversary roles — are savvy enough not to give the judge cause. That was not the case recently, however, in a long running homeopathic product false advertising case in the Southern District of California. Allen v. Similasan Corp., No. 12-CV-376-BAS-JLB, 2016 WL 4249914, at *1 (S.D. Cal. Aug. 9, 2016).

The allegations in this case, which are similar to those of other recent homeopathy cases (see e.g., Nat’l Council Against Health Fraud v. King Bio Pharms., 107 Cal. App. 4th 1336, 1348 (2003); Herazo v. Whole Foods Mkt., Inc., No. 14-61909-CIV, 2015 WL 4514510, at *1 (S.D. Fla. July 24, 2015); Conrad v. Boiron, Inc., No. 13 C 7903, 2015 WL 7008136, at *1 (N.D. Ill. Nov. 12, 2015)) complain that Similasan engaged in false advertising by omission by not including on its products’ labels statements to the effect that (i) the product was not FDA approved as medically effective and (ii) the active ingredients were diluted. Notably, neither of those disclaimers is required on homeopathic products – but even so, many companies voluntarily include them.

In Similasan, after four years of hard fought litigation the Defendant had successfully narrowed the claims by summary judgment [Dkt. No. 142] and Plaintiffs had certified a class [Dkt. No. 143]. Similasan, however, filed a motion to decertify, arguing that Plaintiffs would not be able to prove materiality or falsity with their expert witnesses’ survey evidence [Dkt. No. 164]. With the motion to decertify pending, the parties settled and sought judicial approval of their agreement [Dkt. No. 196]. But the settlement was not a cure the district court could swallow. Judge Bashant noted her role in the fairness hearing was to look for “subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations.” (2016 WL 4249914, at *3 citing In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir.2011)). In this case, the signs were not subtle, and it was not a close call for the Court to deny approval.

In particular, Judge Bashant took exception to the following features of the proposed agreement:

The remedy for the unnamed class was injunctive relief only. While the company agreed to add the disclaimers that Plaintiffs’ counsel had complained were omitted, Similasan was not required to compensate class members;
The only money went to the class representatives who would pocket $2,500.00 each and Plaintiff’s counsel who secured a clear-sailing agreement which would permit an award of fees in excess of $550,000.00;
In exchange for injunctive relief, class members released Similasan from all claims identified in the complaint;
The release covered a nationwide class even though the Court had certified a California class only.

These settlement terms were not good enough for the Court. The class was being asked to give up the right to sue but receiving nothing in return. Indeed, to the extent the remedy was an injunction, a class member who opted out would receive the same benefit without forfeiting any rights. Tellingly, eight State Attorneys General (Arizona, Arkansas, Louisiana, Michigan, Nebraska, Nevada, Texas and Wyoming) filed an amicus curiae brief urging the Court to reject the proposed settlement. [Dkt. No. 219].

The Court also discussed the role that notice (or lack thereof) played in its decision making. The Court observed that the proposed class would have been in the tens of thousands [Dkt. No. 216], but the settlement notice prompted only 136 views of the settlement information website and 21 phone calls to the settlement hotline. The Court attributed this lackluster response to the weakness of the notice, which consisted of a single ad in USA Today and some incidental online placements. But the reality is the paucity of the economic return (i.e. zero) likely resulted in mass indifference.

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

June 10, 2016False Advertising, FDA, FoodCalifornia, class action suits, consumer action, false advertising, FDA, labeling, Ninth Circuit

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

By: Brent E. Johnson

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.

Enhanced Food Labelling Guidelines

June 3, 2016FDA, FoodFDA, labeling, Nutrition Labels

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

By: Brent E. Johnson

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:

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.

Au Naturale

April 15, 2016All Natural Litigation, FDA, Food, FTCAll Natural, FDA, Federal Trade Commission

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

By: Brent E. Johnson

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.

Is the Primary Jurisdiction Doctrine Alive Again for “Natural” Defendants?

April 1, 2016All Natural Litigation, Consumer Class Action, FDAConsumer Class Action, FDA, Ninth Circuit, Primary Jurisdiction, Second Circuit

** Ninth Circuit Stays Natural Case In “Food Court” **

By: Brent E. Johnson
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The doctrine of primary jurisdiction is a prudential means to stay or dismiss a party’s claims if the claims are better adjudicated or answered by an administrative agency – it “is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties.” Ellis v. Tribune Television Co., 443 F.3d 71, 81 (2d Cir.2006). It is properly applied “whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body.” Id. When applicable, “a court defers to the agency for advisory findings and either stays the pending action or dismisses it without prejudice” Johnson v. Nyack Hosp., 86 F.3d 8, 11 (2d Cir.1996).

Courts must make a case-by-case determination when considering primary jurisdiction. In doing so, they generally focus on: (1) whether the question at issue is within the conventional experience of judges or whether it involves technical or policy considerations within the agency’s particular field of expertise; (2) whether the question at issue is particularly within the agency’s discretion; (3) whether there exists a substantial danger of inconsistent rulings; and (4) whether a prior application to the agency has been made. Nat’l Commc’ns Ass’n v. AT & T, 46 F.3d 220, 222 (2d Cir.1995).

There was a time when “primary jurisdiction” was in vogue for “all natural” defendants because of the perception that the FDA was the proper administrative body to answer the question of what sort of ingredients and products qualify as “natural.” The leading case was Astiana v. Hain Celestial Grp., Inc., 905 F. Supp. 2d 1013 (N.D. Cal. 2012). This case involved Hain Celestial’s cosmetics products with labels including “All Natural,” “Pure Natural,” or “Pure, Natural & Organic.” In this case, the putative nationwide class representatives alleged that they had been duped into purchasing Hain’s cosmetics that allegedly contained synthetic and artificial ingredients such as benzyl alcohol. As is typical in such cases, the plaintiffs sought damages and injunctive relief under a variety of theories including statutory violations under the California’s Consumer Legal Remedies Act. The district court dismissed the case, applying primary jurisdiction, holding that “[in] the absence of any FDA rules or regulations (or even informal policy statements) regarding the use of the word “natural” on cosmetics labels, the court declines to make any independent determination of whether defendants’ use of “natural” was false or misleading. Doing so would “risk undercutting the FDA’s expert judgments and authority.” Other district courts invoked the agency’s primary jurisdiction to wait and see if the FDA intended to offer regulations regarding the use of the term “natural” (in particular in GMO food cases). In re Gen. Mills, Inc. Kix Cereal Litig., No. CIV–A–12–249 KM, 2013 WL 5943972 (D.N.J. Nov. 1, 2013), Barnes v. Campbell Soup Co., No. C12–05185 JSW, 2013 WL 5530017 (N.D.Cal. July 25, 2013) (GMO food case), Cox v. Gruma Corp., No. 12–CV–6502 YGR, 2013 WL 3828800 (N.D.Cal. July 11, 2013) (GMO case).

Undeterred by the district court’s dismissal, the Plaintiffs in Astiana went on a two pronged attack. They went directly to the FDA seeking guidance on the definition of “natural.” The FDA responded by letter stating – “cosmetic public health and safety matters are currently fully occupying the resources that FDA has available for proceedings on cosmetics matters” and “proceedings to define ‘natural’ do not fit within [the agency’s] current health and safety priorities.” Plaintiffs also appealed to the Ninth Circuit. Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 759 (9th Cir. 2015). The Ninth Circuit held that — while the district’s court primary jurisdiction doctrine decision was not wrong — it should have stayed the matter awaiting an FDA response. Upon remand, the district court revisited the primary jurisdiction argument and, recognizing that the recent FDA letter demonstrated that the FDA has no interest in the subject matter and, therefore, referral to the FDA would be futile, the court denied defendant’s motion to stay on primary jurisdiction grounds. Astiana v. Hain Celestial Grp., Inc., No. 4:11-cv-06342-PJH (N.D. Cal. October 9, 2015) (Dkt. No. 114).

Courts in other jurisdictions have followed this same rejection of the primary jurisdiction doctrine argument made by cosmetic company defendants in “natural” cases. Goldemberg v. Johnson & Johnson Consumer Companies, Inc., 8 F. Supp. 3d 467, 476 (S.D.N.Y. 2014) (“the FDA has not begun to promulgate a rule concerning the term natural in cosmetics . . [i]nstead, it recently declined to make such a determination . . . [t]hus, as the agency is not simultaneously contemplating the same issue . . . this factor weighs against applying the primary jurisdiction doctrine”); Paulino v. Conopco, Inc., No. 14-CV-5145 JG RML, 2015 WL 4895234, at *1 (E.D.N.Y. Aug. 17, 2015); Langan v. Johnson & Johnson Consumer Companies, Inc., 95 F. Supp. 3d 284, 290 (D. Conn. 2015); Fagan v. Neutrogena Corp., No. 5:13-CV-01316-SVW-OP, 2014 WL 92255, at *1 (C.D. Cal. Jan. 8, 2014) (“Plaintiffs’ claims are not barred by the doctrine of primary jurisdiction . . . [as the] FDA has affirmed that proceedings to define the term natural in the context of cosmetics do not fit within its current health and safety priorities.”); see also Reid v. GMC Skin Care USA Inc., No. 815CV277BKSCFH, 2016 WL 403497, at *1 (N.D.N.Y. Jan. 15, 2016) (rejecting primary jurisdiction in case alleging that face cream with “DNA repair effect” statements was misleading); Randolph v. J.M. Smucker Co., No. 13-80581-CIV, 2014 WL 1018007, at *6 (S.D. Fla. Mar. 14, 2014).

At the same time that the primary jurisdiction doctrine was being buried with respect to “natural” claims, it remained viable in various food cases, particularly those presenting discrete technical questions, i.e. Backus v. Gen. Mills, Inc., 122 F. Supp. 3d 909, 933 (N.D. Cal. 2015) (primary jurisdiction invoked on question of the amount of trans fat in baked goods that is safe); Saubers v. Kashi Co., 39 F. Supp. 3d 1108 (S.D. Cal. 2014) (primary jurisdiction invoked with respect to “evaporated cane juice” labels) (collecting cases). The basis for primary jurisdiction in particular in the ECJ cases is that that FDA has indicated that it WILL issue regulatory guidance on evaporated cane juice – but not until the end of 2016. See also Draft Guidance for Industry on Ingredients Declared as Evaporated Cane Juice; Reopening of Comment Period; Request for Comments, Data, and Information, 79 Fed.Reg. 12,507 (Mar. 5, 2014). Most evaporated cane juice cases are currently stayed (or dismissed) see, e.g., Gitson, et al. v. Clover-Stornetta Farms, Inc., Case No. 3:13-cv-01517-EDL (N.D. Cal. Jan. 7, 2016) (extending ECJ stay for an additional 180 days, until August 2016) (Laporte, J.); Swearingen v. Amazon Preservation Partners, Inc., Case No. 13-cv-04402-WHO (N.D. Cal. Jan. 11, 2016) (Orrick, J.) (extending ECJ stay and continuing case management conference until July 2016). A few judges have lifted the ECJ stay (impatient at the FDA’s movement) but they appear to be out-liers. See Figy v. Lifeway Foods, Inc., No. 3:13-cv-4828-TEH (N.D. Cal. Jan. 4, 2016), Dkt. No. 57; Swearingen v. Pacific Foods of Oregon, Inc., No. 13-cv-04157 (N.D. Cal. Jan. 5, 2015), Dkt. No. 61.

But we digress. Back to “natural” and a significant development. In November 2015, the FDA issued a request for comments regarding the use of the term “natural” in connection with food product labeling. See Use of the Term “Natural” in the Labeling of Human Food Products; Request for Information and Comments, 80 Fed. Reg. 69,905 (Nov. 12, 2015). See our previous blog post. While noteworthy in and of itself, the FDA’s requests for comments also raised the secondary issue of whether the FDA’s new-found interest in potentially defining “natural” with respect to foods triggers the primary jurisdiction doctrine? Last week, the Ninth Circuit answered – Yes. In Kane v. Chobani, LLC, No. 14-15670, 2016 WL 1161782, at *1 (9th Cir. Mar. 24, 2016), the circuit court dealt with an appeal from the Northern District of California where buyers of Chobani fruit flavored Greek yogurt filed suit against the company alleging that its labels and advertising violated California law because the “all natural” yogurt included fruit juice and turmeric. Before the district court, the plaintiffs had a difficult time articulating why it was plausible to allege that fruit juice and turmeric are unnatural vacillating between the argument that it is unnatural to use these ingredients to color yogurt and the argument that the fruit juices at issue were so heavily processed that they are no longer natural. Ultimately the district court found that the case warranted dismissal on Rule 9(b) and 12(b)(6) grounds. Kane v. Chobani, LLC, 973 F. Supp. 2d 1120, 1138 (N.D. Cal. 2014). Plaintiffs appealed on the basis that under primary jurisdiction their case should have been stayed – not dismissed. And the Ninth Circuit agreed, vacating the dismissal and remanding to the district court under a stay pending resolution of the FDA’s “natural” proceedings. So a win for the plaintiffs in Chobani – but one that defendants will take careful note of – in the Ninth Circuit and beyond.

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

March 23, 2016Consumer Class Action, Direct Competitor Lawsuit, Food, Lanham ActAttorney Fees, California, class settlement, Consumer Class Action, FDA, Lanham Act

By: Brent E. Johnson

** 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.

No Parm, No Foul?

February 25, 2016False Advertising, FDA, FoodCalifornia, Class Acton Suit, FDA, Food Adulteration, Misbranding, New York

** Class actions Filed Following Bloomberg Reports of Cellulose Filling in Parmesan Cheese **

By: Brent E. Johnson

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?

FDA Seeks All Natural Comments

November 12, 2015All Natural Litigation, FDA, Federal PreemptionAll Natural, FDA, reasonable consumer standard

Green apple with stethoscope

**Are we a step closer to solving the All Natural problem?**

By: Brent E. Johnson

There are problems faced by “All Natural” or “100% Natural” defendants. See prior post. A specific problem for defendants is the inability to rely on any definitive Food and Drug Administration (FDA) guidance. The FDA’s position has been clear – it “has not promulgated a formal definition of the term ‘natural’ with respect to foods.” See Letter Leslie Kux, Assistant Commissioner for Policy, Food and Drug Administration, to the United States District Court, Northern District of California, dated January 7, 2014. To date the FDA has created only an “informal policy statement.” Janney v. Mills, 944 F. Supp. 2d 806, 812 (N.D. Cal. 2013) (citing 58 Fed. Reg. 2302–01). If there was federal regulation – defendants would have clarity in their positions – and state law claim would likely be pre-empted, see e.g., Lam v. General Mills, Inc., 859 F.Supp.2d 1097, 1102–03 (N.D.Cal.2012). In the absence of regulation, the question of what “natural” means and whether a product’s labeling violates the law is currently governed by an unwieldy “reasonable consumer standard”. Williams v. Gerber Prods. Co., 552 F.3d 934, 938 (9th Cir.2008) citing Freeman v. Time, Inc., 68 F.3d 285, 289 (9th Cir.1995)). This lack of objective standards is one of the reasons why the litigation has been able to take hold – at the same time as “natural” labeled food has boomed (the Washington Post reports that nearly $40.7 billion worth of food items in the U.S. has some labeling of this type). Fortunatley, the FDA has changed tack – responding, inter alia, to requests from Federal Courts and a citizen petition from the Grocery Manufacturers Association it has published a Federal Register notice asking for information and comments on the use of the term “natural” in food labeling. Specifically, the FDA asks for information and public comment on questions such as: whether it is appropriate to define the term “natural,”; if so, how the agency should define “natural,”; and how the agency should determine appropriate use of the term on food labels. Notably, the FDA notes that it may be looking to expand its policy on natural foods to include – not only the synthetic/artificial divide, but also questions of whether pesticide free and manufacturing processes should be part of the equation. The FDA is accepting public comments beginning on November 12, 2015 and finishing February 10, 2016. Comments may be submitted electronically (under FDA-2014-N-1207).

Safe Harbor for Vodka

October 3, 2015Alcohol Labeling, Consumer Class Action, Safe Harbor DefenseFDA, puffery, Safe Harbor Defense, TTB

**District Court Applies Federal Alcohol Administration Act to State Consumer Law Safe Harbor to Dismiss “Handmade” False Advertising Claims Against Vodka Maker in Florida** . . .

By: Brent E. Johnson

Recently there has been a raft of purported class actions targeting beer and spirits makers. See prior post. Generally, defendants have been successful on motions to dismiss on their argument that puffery such as “handmade” or “craft” are not actionable terms. Defendants generally have not been successful in asserting an absolute defense based on state law safe harbors. The safe harbor defense is not complicated – a state consumer law action cannot be asserted against labels authorized by federal law – and in that alcohol labels must be approved by the Alcohol and Tobacco Tax and Trade Bureau (TTB), then alcohol makers have an absolute defense. Courts have been reticent to accept this argument at the pleading stage. In a recent Florida district court case, common sense on this point has prevailed. In Pye v. Fifth Generation, Inc., No. 4:14CV493-RH/CAS, 2015 WL 5634600, at *1 (N.D. Fla. Sept. 23, 2015), defendants – the makers of Tito’s Handmade Vodka – were sued (inter alia) under Florida’s Deceptive and Unfair Trade Practices Act, Florida Statutes§§ 501.201-501.213 (DUTPA) on the allegation that “handmade” and “old fashioned” claims were misleading. DUPTA includes a safe-harbor provision: it “does not apply to … an act or practice required or specifically permitted by federal or state law.” § 501.212(1). The safe harbor has been successfully used by pharmaceutical companies (i.e. whose products are heavily regulated by the FDA) in relation to their labeling. See, e.g., State of Fla., Office of Atty. Gen., Dept. of Legal Affairs v. Tenet Healthcare Corp., 420 F. Supp. 2d 1288, 1310 (S.D. Fla. 2005); Prohias v. AstraZeneca Pharm., L.P., 958 So. 2d 1054, 1056 (Fla. 3d DCA 2007). The Federal Alcohol Administration Act (FAA) regulates the distribution of distilled spirits, including labeling and packaging. See 27 U.S.C. § 205(e); 27 C.F.R. § 5.42(a). The TTB enforces these provisions in a number of ways, chiefly through requiring alcohol labels to have a valid Certificate of Label Approval (“COLA”). Before issuing a COLA, the TTB evaluates and preapproves the alcohol label to ensure it contains all mandatory information and contains no prohibited or misleading information. The court noted in Pye that the TTB had expressly approved Defendant’s label and, therefore, it was specifically permitted by federal law within the meaning of Florida Statutes (§ 501.212.) On that basis, plaintiff’s Florida consumer protection claims were dismissed with prejudice.

Muscling a Settlement

September 30, 2015Consumer Class Action, Pre-Certification, SettlementFDA, pre-certification, Rule 12(b)(6)

protein powder. Supplements for bodybuilders

**Musclepharm negotiates a pre-certification settlement of claims made in relation to claims that its Protein Powder has misleading protein spiking ingredients ** . . .

By: Brent E. Johnson

Musclepharm has been sued in the Central District of California alleging that its Combat Powder whey protein is misleadingly labeled. The case centers around the phenomena of protein spiking: the allegation that because Food and Drug Administration (FDA) guidelines that measure protein use nitrogen as its baseline – a manufacturer can spike the level of the FDA protein measure by adding cheaper non-protein nitrogen sources (such as amino acids, creatine etc.) In Bruaner v. MusclePharm Corp., No. CV148869FMOAGRX, 2015 WL 4747941, at *1 (C.D. Cal. Aug. 11, 2015), the plaintiff has taken a novel approach. It alleges not that protein spiking, itself, is misleading but that Musclepharm’s advertising is misleading because it contains a “Brand Promise” that represents that Musclepharm does not engage in the practice of protein spiking – when plaintiff’s testing allegedly suggests that it does. On a motion to dismiss, Musclepharm argued that the FDA has primary authority over this area and FDA labeling regulations preempt state law claims. On August 11, 2015, the district court rejected those arguments. Bruaner v. MusclePharm Corp., No. CV148869FMOAGRX, 2015 WL 4747941, at *1 (C.D. Cal. Aug. 11, 2015). The court agreed with plaintiff that plaintiff’s case was not challenging the FDA labeling or testing protocols per se, but rather, was challenging what Musclepharm states in its advertising about those tests. Plaintiff did not have a complete victory, however. The court took exception to plaintiff’s vague descriptions of advertising and websites that he claimed to have relied on in making his purchase decisions – thereby limiting the scope of plaintiff’s proposed case and class. With both parties winning some and losing some of their arguments at the Rule 12(b)(6) stage, the matter settled. Because the proposed settlement was pre-certification, the court did not need to review or approve the proposed – the parties filed a stipulation to that effect and the matter was dismissed on September 28, 2015.