In a 2010 television commercial funded by the Corn Refiners Association, a hunky dad, with his adorable daughter in tow, talks about how scientific studies prove that high fructose corn syrup is no worse for you than cane sugar. “Your body can’t tell the difference,” the dad says as he walks away into a corn field. “Sugar is sugar.”
Sugar producers, who call CRA’s claims dubious, could have just responded with slick ads of their own. Instead, a group of them hired Squire Sanders to bring a false advertising case in 2011 against CRA and five of its member companies–Archer-Daniels-Midland Company (ADM), Cargill, Corn Products International Inc., Roquette Inc, and Tate & Lyle Ingredients Americas Inc. On Tuesday, the case mostly survived a key early challenge.
In a 15-page order, U.S. District Judge Consuelo Marshall in Los Angeles largely denied a motion to dismiss filed by the five CRA member companies, who are represented by Winston & Strawn. Judge Marshall ruled that the sugar producer-plaintiffs adequately alleged a false advertising claim against four of the five corn refiners–ADM, Cargill, Corn Products, and Tate & Lyle. The judge dismissed Roquette, however, on the grounds that the complaint failed to explain how the company participated in the allegedly false ad campaign.
The plaintiffs, including Western Sugar Cooperative and Michigan Sugar Company, first brought suit in April 2011, alleging that a $50 million effort by CRA to rebrand high fructose corn syrup violated the Lantham Act as well as California unfair competition law. CRA’s marketing campaign included internet banner ads, TV commercials, and a website called www.sweetsurprise.com that tout HFCS as a “natural” product. CRA also applied (unsuccessfully) for U.S. Food and Drug Administration approval to change the name of HFCS to “corn sugar.”
According to the plaintiffs, the defendants are individually culpable, because they made public statements ratifying the ad campaign. The plaintiffs also argued that, in the alternative, the defendants are vicariously liable for CRA’s conduct, because they allegedly paid $13 million to CRA for the campaign and dominated the trade group’s leadership.
Judge Marshall rejected a bid by CRA to extract itself from the case in October 2011, as we reported here. He did, however, dismiss the state law unfair competition claims under California’s anti-SLAAP statute, which allows for early termination of cases that could have a chilling effect on free speech. A day after that decision came down, the plaintiffs added famed Texas trial lawyer W. Mark Lanier of the Lanier Law Firm to their roster. The beefed-up legal team filed a second amended complaint last November.
The corn refiner defendants, represented by Winston partners Dan Webb and Stephen D’Amore, moved to dismiss once again in December. “Plaintiffs have improperly lumped all of the Member Companies together and have failed to set forth individual and particular allegations against each of the Member Companies,” they wrote. The also argued that, because false advertising suits essentially allege fraud, the case should be analyzed under the heightened pleading standard for fraud claims laid out in Federal Rule of Civil Procedure 9(b).
Finding no guidance from the U.S. Court of Appeals for the Ninth Circuit on that point, Judge Marshall applied both the 9(b) standard and the typical rule 12(b)(6) standard. He ruled that, under either standard–and under both individual and vicarious theories of liability–the plaintiffs offered enough specifics to back up their claims against every defendant but Roquette. “The court finds that these facts, namely, the use of spokespersons to disseminate the advertising theme, and the use of the phrase ‘corn sugar’ in documents and communications that are directed toward customers and investors, are sufficient to inform Member Companies Cargill, Tate & Lyle, ADM, and Corn Products, of their alleged fraudulent conduct,” Marshall wrote.
John Burlingame of Squire Sanders told us he’s “delighted” with the ruling. He also noted that the dismissal of Roquette was without prejudice, so his firm can move to add them back into the case as new facts come to light during discovery. “We’re not too worried about that though,” Burlingame said. “We’ve got the big boys in the case, even though had to drag them into court kicking and screaming.”
Winston & Strawn’s D’Amore declined to comment. CRA president Audrae Erickson said in a statement that the ruling “is solely about who is included in the lawsuit and has no bearing on the merits of the case which are about ensuring that consumers get the facts regarding high fructose corn syrup.”