Vision of the Future of Food: Stormy, With More Than a Chance for Litigation

This October, I am participating in the first ever Food Vision USA event, in which key players in the U.S. food, beverage and nutrition industries will come together to engage and network over strategy, research and development, marketing, branding, legal issues, manufacturing operations, and the next frontiers of industry innovation in the world’s biggest food market. On the three-day menu is discussion of trending topics such as how food businesses can maximize their potential with the 21st century consumer, personalized nutrition’s role in the next wave of food trends, and which side of the aisle holds the upper hand in the seemingly endless cycle of class action food litigation.

I look forward to hearing insights from other industry leaders on these topics and predict that at least the following recent developments will surface during the conference’s discussions — as I think they signal that food industry “innovation” is not limited to products themselves. Consumers continue to “innovate” new types of claims, while food market evolution itself has spawned new developments that make the market ripe for ongoing class action litigation. While “natural” labels continue to serve as the long-standing litigation lightning rod, there are new areas for plaintiffs to exploit. For example:

(1) PHOs: Food products with ingredients deemed “GRAS” – “generally recognized as safe” — under the federal Food Drug and Cosmetic Act (21 U.S.C. § 301, et seq.) are presumptively safe. GRAS status means that there is general consensus among qualified experts that the additive is not harmful when used as intended. Food manufacturers are not required to obtain premarket approval to use GRAS ingredients. GRAS status can change as food science evolves. Unapproved additives are deemed “adulterated” and are illegal to sell, rendering manufacturers subject to regulatory action. (21 CFR 170.3; 21 CFR 170.30; 21 U.S.C. § 201(s); 21 U.S.C. § 409)

On June 16, 2015, the Food & Drug Administration issued an order that partially hydrogenated oils (PHOs) are no longer GRAS for any human food.

Under the June 16 order, food manufacturers will have three years to either remove PHOs from their food products or petition the FDA for permission to use PHOs, in accordance with 21 U.S.C. § 348(b). The FDA’s order does not contain an express preemption clause and does not contain any other protections against civil litigation during the three-year compliance period. The FDA’s position is that state or local laws banning or limiting PHOs would not likely conflict with the FDA’s new order or frustrate federal objectives.

Besides the supply chain headaches, rising cost nightmares, requisite recipe reformulations, competition for limited available quantities, and pressure on manufacturers from wholesalers and retailers to ensure products’ compliance, the litigation exposure from the June 16 order is obvious, from both product liability and consumer fraud claim perspectives. Reaction from the plaintiffs’ bar to the FDA order has been swift — despite the three-year compliance period allowed under the rule. See, e.g., Backus v. Nestle USA Inc., No. 3:15-cv-01963 (N.D. Cal. Apr. 30, 2015) (class action complaint alleging that coffee creamers contain PHO while bearing a “0 grams of trans fat” nutrient content claim); Backus v. General Mills, Inc. No. 3:15-cv-01964 (N.D. Cal. Apr. 30, 2015) (class action complaint that baking mixes contain PHO); Walker v. ConAgra Foods Inc., No. 4:15-cv-02424 (N.D. Cal. June 1, 2015) (class action claims that Crunch ‘n Munch snacks have a “0 grams trans fat” label; plaintiff specifically alleged that “FDA has concluded that PHO is unfit for use in food and is in the process of banning it”); Backus v. H.J. Heinz Co, No. 3:15-cv-02738 (N.D. Cal. June 18, 2015), (filed two days after FDA’s rule announcement, class action complaint claimed that Easy Fries and Easy Tater Tots have trans fat-containing PHOs, but are labeled as containing “0 trans fat”; plaintiffs expressly cited FDA announcement that “PHOs are not [generally recognized as safe] for any use in human food”).

Once again, the food market’s biggest player – FDA action – has innovated new claims in food court.

(2) Slack-fill lawsuits: Many think of “creativity,” “design” and “cost” issues when it comes to product packaging, but we should now add “class actions” to that word association list. The plaintiffs’ bar has begun seizing upon “slack-fill” litigation as the menu specialty of the day. For example, plaintiffs have filed suit alleging that the deodorant container appeared larger than the actual stick inside (Alberto v. Colgate-Palmolive Co., No. 1:14-cv-05649 (E.D.N.Y. Sept. 25, 2014)); eye drops’ packaging led purchasers to believe they were receiving more than what was contained in the bottle; pill bottles’ allegedly deceived consumers via the amount of shelf space occupied (Fermin v. McNeil-PPC Inc., No. 1:15-cv-01215 (E.D.N.Y. Mar. 9, 2015)); and potato chip bags’ slack-fill supposedly lacked a permissible purpose (Lam v. ConAgra Foods Inc., No. 1:15-cv-02334 (E.D.N.Y. Apr. 23, 2015)). The proposed class action cases thus far have involved the usual players, in terms of theories of liability: fraud, negligent misrepresentation, breach of express warranties, unjust enrichment and violation of state consumer protection laws.

For the next era of food litigation, presentation counts, it seems.

(3) Menu labels: The Common Sense Nutrition Disclosure Act, also known as H.R. 2017 (filed as Food Labeling: Nutrition Labeling of Standard Menu Items in Restaurants and Similar Retail Food Establishments, docket number FDA-2011-F-0172-0001, with the U.S. Food and Drug Administration), requires businesses with 20 or more locations selling “restaurant-type food” to list calorie counts on their menus and provide nutritional information to customers on request. The rule applies to restaurants, fast-food joints, movie theaters, grocery stores and other locations that sell ready-to-eat single servings of food, as well as vending machines. On July 9, 2015, the FDA provided an additional year (until December 2016) for food-service establishments to comply with the rule. Outcry from the food industry over the menu labeling rule has spread nationally. Although H.R. 2017 would expressly deny any standing for civil suits over violations, the potential for regulatory action has the food industry in an uproar over the time and costs required for implementation.

Furthermore, even setting aside the issue of litigation, the “cost” to the industry is undeniable, as market share losses are anticipated from consumers’ sticker shock at calorie count disclosures.

(4) Liquor labels: “Spirited” litigation is on the rise, with mislabeling suits against liquor manufacturers for use of “handcrafted,” “handmade” or “craft” labels. See, e.g., Parent v. MillerCoors LLC, No. 3:15-cv-01204 (S.D. Cal. May 30, 2015) (claim that Blue Moon Belgian-style beer is falsely advertised as craft beer); Salters v. Beam Suntory, Inc, No. 4:14-cv-00659 (N.D. Fl. Dec. 11, 2014) (class action claims that bourbon is falsely advertised as “handmade”).

Evolution of the food market itself, in response to consumer trends, has innovated a new genre of food litigation.

(5) Added sugar disclosures: On July 24, 2014, the FDA proposed a measure requiring label details on the percentage of the daily value of added sugar content of packaged foods.The July announcement came on the heels of the FDA’s February 2014 overhaul of nutrition labels to require food companies to disclose more precise information about serving sizes and ingredients, including calorie counts and sugar content. At the time, the agency had proposed adding only the number of added sugars to the label. The July announcement will likely yield sticker shock among the consuming public, with pints of some brand-name premium ice creams yielding 100g of sugar and boxes of cookies containing 88g of sugar.

Again, setting aside the issue of private right of civil action under the FDA sugar ruling, the FDA implicates revenue and market share issues for products suddenly deemed less desirable in the eyes of a consuming public that grows increasingly health conscious each year.

The storm clouds are gathering for the next weather front of food labeling litigation. See you in the Windy City in October.