The Food and Beverage Industry: Understanding the New Wave of Class-Action Lawsuits
Over the last five years, the food and beverage industry has experienced a rise in consumer class-action lawsuits. Previously, a food and beverage company’s risk of consumer litigation arose primarily from personal injury claims, such as if a consumer were to become ill from consuming a product. Now, class actions are often filed based on claims that consumers have been misled by the company’s advertising or product labeling.
The trend began with class action suits challenging products labeled as ‘natural’. The FDA, USDA and FTC have not regulated the term ‘natural,’ claiming it holds no nutritional meaning, though it is a commonly used term within marketing tactics. Other advertising and labeling claims are increasingly being challenged as well, such as complaints being filed with respect to the use of the following phrases: ‘evaporated cane juice’ as a replacement for of sugar, claiming a product is ‘imported from’ or ‘made in’ certain locations, whether or not a product has been‘handmade’, as well as the labeling of trans fats.
Products as diverse as tea, guacamole and almond milk have been subject to litigation. Northern California, once dubbed the Food Court, is no longer alone in the industry’s lawsuit increase climate. Cases are filed in both federal and state courts across the country. Often, the filing of one lawsuit prompts copycat lawsuits in other jurisdictions.
How class action suits differ from single-plaintiff lawsuits?
Unlike single-plaintiff lawsuit, class action suits require litigating on two fronts; on the actual merits of the lawsuit and whether or the plaintiff can be considered a class. Class certification means that the court has allowed one individual (the plaintiff) to bring the case on behalf of a larger group of similarly situated consumers. Devising a strategy to address both the merits and class certification early on is vital to successfully and efficiently defending a company from these lawsuits. Courts have been willing to dismiss claims for a variety of reasons and the plaintiff properly achieving class certification has been one of them.
What Is the Standard for Bringing a False Advertising Lawsuit?
Most jurisdictions facing recent food and beverage class actions use the ‘reasonable consumer’ standard to determine the validity of a claim. According to the FTC, “An interpretation of a representation is not actionable unless it is reasonable, or is shared by a significant and representative segment of the population exposed to the claim.” Plaintiffs rely on state consumer protection laws, such as California’s Unfair Competition Law, the False Advertising Law, the Consumer Legal Remedies Act, Florida’s Deceptive and Unfair Trade Practice Act, and New York’s General Business Law § 349 to make their case.Some courts dismiss cases, on the basis that the reasonable consumer is not likely to be deceived by a defendant’s advertisement or labeling. In one notable case, the court dismissed a lawsuit against a manufacturer that labeled its pasta as ‘all natural.’ The court reasoned that the ‘all natural’ labeling was not misleading because a reasonable consumer is aware that pasta is “…not springing fully formed [from] Ravioli trees and Tortellini bushes.” Another court dismissed a lawsuit against the manufacturer of bourbon labeled as ‘handmade’, reasoning that “the term obviously cannot be used literally to describe bourbon. One can knit a sweater by hand, but one cannot make bourbon by hand. Or at least, one cannot make bourbon by hand at the volume required for a nationally marketed brand...No reasonable consumer could believe otherwise.”Courts have also dismissed cases when the company’s labeling has been authorized by the Food and Drug Administration under the federal Food, Drug and Cosmetic Act and as amended under the Nutrition Labeling and Education Act. This defense is called preemption and can be raised at the motion to dismiss this stage.
What Happens if the Class Action Continues Past the Motion-to- Dismiss Stage?
Despite some favorable motion-to- dismiss rulings in food and beverage class action suits, whether or not the product’s advertising misleads a reasonable consumer is usually a question of fact. The case often proceeds to discovery, which means both parties are provided each other’s evidence. Following discovery, the plaintiff may move to certify the class.Though the plaintiff carries the burden to prove that the case should be treated as a class-action suit, a company should develop a strategy for preventing class certification early in the case. This includes identifying evidence proving that the allegedly false advertising was uniformly made to the class, whether the advertising was important, and whether class-wide damages are actually appropriate.
What Are the Damages?
Some class action complaints request full refunds, claiming that a mislabeled product has provided no value. Courts often reject full-refund damages requests and hold that the proper measure of damages is the difference between the value of the product as represented and the price paid by the class. As one court aptly noted, return of the full retail or wholesale price is not a proper measure of restitution because it fails to take into account the value class members received from the products. In the food and beverage context, for example, consumers receive calories, nutrition, vitamins and minerals from the product. Plaintiffs often work with damages experts who measure the difference between what was represented and the price paid. They attempt to recover that difference multiplied by the total sales of the company for a particular period and jurisdiction.
What About Unknown Class Members?
Many food and beverage products are sold through retailers, and manufacturers usually do not have significant information regarding consumers of their product, therefore identifying the alleged class. For a class to be certified, it must be ascertainable, or clear and well-defined enough for the court to determine whether an individual is a member of the proposed class. The court must decide this in a reliable and feasible manner based on objective criteria. Courts are still determining what qualifies as “reliable” and “objective,” particularly when the products at hand are low-value consumables for which the consumer usually lacks evidence of purchase. For example, the Third Circuit Court of Appeals determined that consumer affidavits are not enough to satisfy the determining requirement in the absence of objective records. The Ninth Circuit Court of Appeals is expected to interpose on the issue soon, as an appeal undertaking this issue is pending before the court.
Contact The Law Office of Alex Tovarian
If you believe that you were a victim of a false advertising, contact Tovarian Law for a free case evaluation.