Trends in Food and Beverage Class Action Litigation

The Food Court Trends in Food and Beverage Class Action Litigation FEBRUARY 2017 © U.S. Chamber Institute for Legal Reform, February 2017. All rights reserved. This publication, or part thereof, may not be reproduced in any form without the written permission of the U.S. Chamber Institute for Legal Reform. Forward requests for permission to reprint to: Reprint Permission Office, U.S. Chamber Institute for Legal Reform, 1615 H Street, N.W., Washington, D.C. 20062-2000 (202.463.5724). Table of Contents Executive Summary ..............................................................................................................1 The Surge of Food Class Actions .........................................................................................5 Litigation Theories and Trends .......................................................................................... 17 Impact of Recent Appellate Decisions ............................................................................. 33 Settlements Primarily Benefit Lawyers, Not Consumers ................................................ 38 Recommendations ............................................................................................................. 46 Prepared for the U.S. Chamber Institute for Legal Reform by Cary Silverman and James Muehlberger, Shook, Hardy & Bacon L.L.P. Executive Summary If you eat, then you are probably a member of a class action. In fact, it is likely that without your knowledge, plaintiffs’ lawyers have told courts that they represent you in dozens of lawsuits. A close review of the litigation makes clear that the vast majority of these class actions result from lawyers shopping for cases, not consumer fraud. About five years ago, a small cadre of The following sections present this class action lawyers turned its attention to report’s key findings on lawsuits food manufacturers. The attorneys found targeting food and beverage marketing that terms used in food labeling, such as based on an in-depth review of court “natural,” the packaging of products, and records, docket monitoring services, advertising opened the door to bringing legal publications, and other sources. lawsuits on behalf of consumers. These lawyers have argued that they do not need The Surge in Litigation to show that consumers saw, heard, or • Food marketing class actions increased relied on the labeling or advertising at issue from about 20 in 2008 to over 425 active when deciding to purchase the product, but cases in federal courts in 2015 and 2016. only that consumers might be misled. • About 120 new food class actions were The theories of litigation are shifting, but the filed in or removed to federal court in torrent of lawsuits has only grown stronger. 2015. Filings increased in 2016, with over There are now hundreds of active food class 170 new food class actions filed in or actions in the federal courts and more in removed to federal court. state courts. A few are so laughable that courts have quickly thrown them out. Some • State courts host many additional are withdrawn or dismissed, typically as a lawsuits, some of which plaintiffs’ result of a private settlement. Many more attorneys have drafted to avoid removal are litigated for years. Several of these to federal court under the Class Action lawsuits have reached multimillion dollar Fairness Act. settlements that line the pockets of lawyers, but provide little or no benefit to consumers. 1 The Food Court The “Food Courts” Litigation Targets & Theories • Three-quarters of food class actions in • Claims challenging products advertised as federal courts are in four states: California “natural” remain most frequent, and have (36%), New York (22%), Florida (12%), expanded to include lawsuits targeting and Illinois (7%). Another 10% of cases similar representations such as “nothing are spread among federal courts in artificial” or “preservative free.” The U.S. Missouri, New Jersey, and Pennsylvania. Food and Drug Administration’s (FDA) Plaintiffs’ lawyers file very few food active consideration of the use of the term class actions in other jurisdictions. “natural” on food labeling has led some courts to place such lawsuits on hold. • The Northern District of California remains the most popular jurisdiction • Food class actions are increasingly for food class actions, but the Eastern targeting products marketed as healthy or and Southern Districts of New York are instances where images on the package, experiencing a surge. such as fruits and vegetables, could purportedly mislead a consumer to believe • Some local jurisdictions, such as certain the product is healthier than it is. areas of California and St. Louis, Missouri, are also hot spots for food litigation. • “Slack fill” litigation, which challenges unneeded extra space in product • A relatively small number of law firms packaging, is on the rise. Plaintiffs’ file most food marketing class actions. lawyers filed 10 slack fill cases in 2013 Some firms specialize in particular types and 2014. During 2015 and 2016, they of claims, cut-and-paste complaints, and filed over 65 new slack fill class actions recycle the same individuals as class targeting food and beverages. Key courts representatives. have thrown out some of the most questionable cases, including claims • While many major food companies alleging Starbucks’ iced coffee deceptively are defendants in these class actions, includes ice that reduces the amount of plaintiffs’ lawyers are also suing family- coffee. Some slack fill lawsuits, however, owned businesses and small employers. have settled for significant sums. • Plaintiffs’ lawyers filed over 50 class actions against retailers that sell “100% grated Parmesan cheese” in 2016, the largest single surge of food class actions to date. The lawsuits allege that the presence of a small amount of an FDA- approved food additive that keeps cheese from clumping renders the product not 100% cheese. U.S. Chamber Institute for Legal Reform 2 • There was a recent uptick in claims • Courts are reluctant to promptly dismiss against liquor makers, alleging products all but the most ridiculous or deficient of such as bourbon and whiskey are not complaints. A few district court judges in “handmade,” and against brewers alleging key jurisdictions, however, have dismissed consumers may believe that the beer is food class actions, finding the allegations made in small, craft breweries. Courts made are contrary to common sense. have largely dismissed these claims, though some remain pending. Ninth Circuit Weighs In • Some class action lawyers are • Food class actions are now reaching the targeting products that contain partially appellate level, but the mixed results are hydrogenated oils (PHOs), known as trans not likely to slow the litigation machine. fats. Courts have found that federal law Four recent Ninth Circuit rulings will preempts lawsuits that conflict with FDA impact future food litigation: regulations that require products with a • In placing a hold on “natural” litigation nominal amount of PHOs to be labeled while the FDA considers use of the 0% trans fat. But the FDA’s recent policy term in advertising, Kane v. Chobani phasing out trans fats has led to another may reduce the plaintiffs’ bar’s flurry of lawsuits, even though the agency enthusiasm for such suits. has given manufacturers until 2018 to change their products. • Ebner v. Fresh could temper slack fill claims targeting food and beverages, • Plaintiffs’ lawyers are increasingly testing particularly products in ordinary products, or relying on testing conducted packaging. by others, to allege that food products include trace amounts of substances that • The non-precedential ruling in Brazil render the product’s labeling inaccurate v. Dole could spur more “all natural” or misleading. Such complaints often suits, but also highlights challenges lack the detail needed to determine the plaintiffs’ lawyers face in satisfying accuracy of the testing method. class certification standards. • Plaintiffs’ lawyers and advocacy groups • Briseno v. ConAgra Foods’ rejection may focus future lawsuits on food makers of a “standalone” ascertainability that highlight positive aspects of products requirement will make district courts containing added sugar. Already, a firm within the Ninth Circuit more attractive has filed a series of lawsuits targeting for filing food and other consumer numerous breakfast cereals. These class actions. lawsuits allege that consumers would be misled to believe cereals such as Cocoa Puffs and Lucky Charms are healthy simply because they are labeled as containing whole grain. 3 The Food Court Settlements Primarily Benefit receive millions in fees, consumers are usually eligible to seek a nominal cash Lawyers, Not Consumers payment, product vouchers, or products • Upon receiving a letter from a plaintiffs’ in the mail. lawyer threatening to file a lawsuit, some food and beverage makers settle cases • Consumers, who often do not feel they they view as meritless to avoid litigation. were wronged, do not benefit from this After a lawsuit is filed, many cases are system. Some consumers file claims or voluntarily dismissed, which typically gladly accept free money or products. indicates a private settlement under which Ultimately, these litigation costs are the plaintiffs’ lawyer and individual plaintiff reflected in the prices of products. get paid, but consumers receive nothing. Recommendations for Reform • In certified class actions, about half of • Courts, legislatures, and regulatory

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