Crafting a Defense in Food-Labeling Class ActionsKelsey M. Larson and Carlos M. Lazatin Corporate Counsel
01-18-2013
Note: This is the first in a series of columns by O’Melveny & Myers attorneys, focusing on key legal issues specific to a variety of U.S. industries.
In recent years, food manufacturers have been peppered by class action lawsuits based on the alleged mislabeling of their products. Plaintiffs’ attorneys have seized on consumers’ health consciousness and the surge of products catering to this trend: foods that advertise “antioxidants,” “no sugar added,” “all natural,” “0g trans fat,” and “no artificial colors, flavors, or preservatives.” If you are a food maker, you have likely faced (or will at some point) a claim that you are misleading consumers and violating federal regulations with these representations on product labels and accompanying websites.
Such claims are often brought under state consumer protection statutes, including California’s Unfair Competition Law, Consumers Legal Remedies Act, and False Advertising Law. In the Northern District of California alone, more than 25 food-labeling cases have been filed in just the past nine months. Rather than wishing this trend away, companies should craft a defense. If faced with a food-labeling lawsuit, what will be your first steps?
1. Responding to the Demand Letter
Before filing suit, a consumer or attorney may send a demand letter to the company, alleging violations of particular laws or regulations and requesting certain relief. In fact, to pursue a damages claim in a class action under California’s Consumers Legal Remedies Act, a potential plaintiff must send a written demand letter at least 30 days before bringing any claim for damages. While the demand letter and response may not change a plaintiff’s decision to file suit, a company may be able to gain some legal advantage with a well-considered response.
Specifically, the company should point out that it guarantees its product and offers any consumer a refund if he or she is unsatisfied—thereby obviating the need for litigation, much less a class action. The company’s response is also an opportunity to explain to the potential plaintiff why litigation in this case is a risky and expensive avenue—not one to be pursued lightly—particularly because of scientific substantiation or other defenses the food maker may have.
While the plaintiff may decide not to abandon his claim, the company may be able to reach a resolution and save the costs of litigation. It’s at least worth a try.
2. Jurisdiction: Federal or State Court?
If your response to the demand letter did not stave off a class action lawsuit, you will need to consider the jurisdiction in which your company has been sued. The vast majority of recent food-mislabeling cases have been brought in federal court, and many of those in the Ninth Circuit. If your company has been sued in state court, you should consider removing the case to federal court if possible, especially if you are facing a putative nationwide class.
Given the number of mislabeling case filings in federal courts, those courts—especially in California—are more likely to have handled such a case before and be familiar with the issues, including the federal regulations involved. In addition, your company will obtain the benefit of key class action decisions such as Mazza v. American Honda Motor Co., a Ninth Circuit decision last year that vacated class certification of a nationwide class of consumers alleging violations of California’s consumer protection statutes.
3. Moving to Dismiss
Because food-mislabeling cases relate to the federal Food, Drug, and Cosmetic Act (FDCA) and its accompanying food regulations, the defendant should explore a potential preemption defense. Section 343-1(a) of the FDCA expressly preempts state-law claims that seek to impose requirements “not identical” to the requirements set forth in certain regulations and code provisions. Food makers have had some success arguing preemption, particularly for claims relating to artificial and natural flavoring, including fruit flavoring and “0g trans fat.” (By contrast, defendants such as Ben & Jerry’s have had less success with preempting certain “natural” claims.) Beyond preemption, the defendant should consider making a primary jurisdiction argument—namely, that the issue of food labeling is within the special competence of the FDA, and it should be left to the FDA to determine and enforce its own regulations.
Even if the defendant cannot dispose of the entire case on preemption or primary jurisdiction grounds, it should consider moving to dismiss the complaint for failure to plead with particularity under Rule 9(b) of the Federal Rules of Civil Procedure. The food-labeling complaints that have been filed are often vague in terms of (1) what representations the plaintiff actually read and relied on; (2) what specific statements the plaintiff claims to be misleading; (3) which products the plaintiff actually purchased; (4) when the plaintiff purchased those products; and (5) where the products were purchased.
Acquiring this information is important for limiting the scope of the complaint. Once the defendant has these details, it should consider moving to dismiss all claims in the complaint relating to products that the plaintiff did not purchase and representations that the plaintiff did not read or rely on. The goal is to narrow the claims at issue, often substantially, and thereby limit the scope of discovery.
4. Moving to Strike Class Allegations
If the complaint is not disposed of on a motion to dismiss, the court’s decision on class certification may be the single most important event in the litigation. A defendant can try to thwart these allegations early in the litigation by filing a motion to strike the class allegations. Pursuant to Rule 23(c), “at an early practicable time . . . the court must determine by order whether to certify the action as a class action.” Courts can strike and have struck class allegations at the pleading stage if the class allegations are deficient or improper on their face.
The defendant’s argument in the food-labeling context would be that, in light of Mazza, the plaintiff cannot maintain a nationwide class action based simply on California’s consumer protection statutes. This is because Mazza found that the consumer protection laws of the states where each class member purchased the product apply to that member’s claims, precluding a finding that common issues of law predominate under Rule 23(b)(3) and, thus, certification of a nationwide class.
A successful motion to strike the nationwide class allegations could significantly reduce potential exposure of the client by leaving only a California (or other state) sub-class. While plaintiffs could presumably refile complaints in other jurisdictions seeking certification of a class of consumers in those states, many consumer protection laws in other states are not as plaintiff-friendly as those in California, which may deter plaintiffs from pursuing cases in those jurisdictions.
5. Bifurcating Discovery
If the case is not dismissed at the pleading stage, the parties will have to proceed with discovery—a time-consuming and expensive process. Indeed, in light of the “rigorous analysis” necessary to determine whether the prerequisites for class certification have been satisfied under the U.S. Supreme Court’s 2011 decision in Wal-Mart Stores, Inc. v. Dukes, there is increasing pressure for meaningful pre-class certification discovery.
One way to try to limit the scope and cost of discovery is to bifurcate class action discovery from merits discovery. That way, if the case does not proceed through class certification, the defendant did not waste resources discovering the merits of the plaintiff’s complaint. Whether the defendant should raise bifurcation at the initial scheduling conference, however, depends on when the defendant proposes to file a summary judgment briefing. If the plan is to adjudicate summary judgment at or near the same time as class certification, bifurcation offers no real advantage. Bifurcation may also work better in theory than in practice. Drawing the line between issues of class certification and issues on the merits is often difficult, and there may be substantial overlap. And a plaintiff may argue that, by bifurcating, it is unable to meet its burden of proving that class certification is appropriate, particularly where the class certification question necessitates a merits-type inquiry.
Once discovery begins, you are off to the races. You may find yourself litigating through class certification until trial. You may find yourself weighing the pros and cons of settling. How you proceed will likely be guided by the decisions you make—and the results you and other companies have obtained—in these early stages. If it is any solace, know that, as a food marketer, you are not alone in facing legal attacks on how your products are labeled.
Kelsey Larson is an associate in O’Melveny & Myers’s class actions, mass torts, and insurance litigation practice. Carlos Lazatin is a partner in the firm’s class actions, mass torts, and insurance litigation group and the intellectual property and technology group, with a particular focus on consumer product litigation. Both reside in O’Melveny’s Los Angeles office.
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