Background
"All Natural" class action litigation in California has persisted and will continue in 2012. In the last two years, a number of consumer class actions were filed in California against various manufacturers and retailers regarding alleged misbranding and false advertising concerning "All Natural" claims. These lawsuits are commonly brought under California's unfair competition and false advertising laws (referred to as the "UCL" and "FAL" or §§ 17200 and 17500 of the California Business and Professions Code). Recent class actions have been brought against products that allegedly contain Dutch (alkalized) cocoa, the preservative sodium benzoate, and a variety of other synthetic ingredients and preservatives.
The Recent Driving Forces Behind California "All Natural" Class Actions and Why the Cases Will Likely Persist
California's consumer protection laws have long been recognized as some of the broadest in the country. Aside from the ability to bring an action against a company for "fraudulent" advertisements and business practices, the UCL prohibits "unfair" business practices, and "unlawful" practices may be demonstrated by "borrowing" laws from jurisdictions outside of California. Suits may proceed in the absence of input from authorities charged with oversight over the issue being litigated. For instance, in "All Natural" litigation, actions may proceed without specified input from the U.S. Food and Drug Administration ("FDA") about what it really means for a product to be "All Natural." In recent years and through 2011, legal developments have only suggested that the "All Natural" litigation will persist in 2012.
The breadth of California's UCL and FAL that indisputably enabled abuse was addressed in 2004, when California voters passed Proposition 64. The law required that private plaintiffs show "actual injury and loss of money or property as a result of unfair competition" upon filing their actions. But despite this clear voter intent to limit consumer protection actions to plaintiffs who suffered actual injury and lost money or property by relying on alleged misrepresentations, recent cases may only breathe more life into "All Natural" class action litigation.
In 2009, the California Supreme Court interpreted Proposition 64 to mean that only named plaintiffs (not absent class members) must demonstrate that they relied on an alleged misrepresentation in order to establish standing to bring suit. In re Tobacco II Cases, 46 Cal.4th 298, 306 (2009). In 2011, the California Supreme Court found that a plaintiff-purchaser of non-defective door locks demonstrated "injury in fact" and "lost money" when the plaintiff purchased locks labeled "MADE IN THE USA," but the locks contained either pins made in Taiwan or components assembled in Mexico. Kwikset Corp. v. Superior Court, 51 Cal.4th 310, 318 (2011).
The recent cases have been followed in "All Natural" litigation. Class actions in California may proceed beyond the pleading stage where there is no proof that the class members relied on an "All Natural" label and where consumers purchased non-spoiled, great-tasting, competitively priced food products. Cases may also progress despite an expectation that a product labeled "All Natural" will contain a synthetic ingredient and the FDA's belief that a food may still be "natural" even when there is some expectation that a synthetic or an artificial ingredient is in it. Add to these developments the fact that the FDA has now taken a form of enforcement action against an "All Natural" product manufacturer for an alleged synthetic preservative in its packaged potatoes, and there seems to be little reason for plaintiffs' lawyers to invest their time reading product labels.
The FDA's November 16, 2011 Warning Letter Regarding Alleged Synthetic Preservatives in "All Natural" Labeled Foods
Nationally, there is (or was) the perception that enforcement of "All Natural" claims in certain settings was not at the fore of the FDA's present public health agenda. As noted in a 2011 Order Denying Motions to Dismiss and Motions to Strike in Astiana v. Ben & Jerry's Homemade, Inc., No. C 10-4387 PJH, U.S. Dist. LEXIS 57348 (N.D. Cal. May 26, 2011), the FDA had voiced its disinclination "to define 'natural' because there were 'still many facets of the issue that the agency will have to carefully consider if it undertakes a rulemaking to define the term natural.'" Id. at *23-24 (quoting Holk v. Snapple Beverage Co., 575 F.3d 329, 341 (3d Cir. 2009)). But in November 2011, the agency enforced its opinion of what it means to have a "natural" product.
On November 16, 2011, as it has done periodically after 1993, the FDA issued a "Warning Letter" to an "All Natural" food manufacturer, alleging that the company's potato product may be misbranded as "All Natural" where it contains a synthetic chemical preservative, disodium dihydrogen pyrophosphate. According to the FDA in its public letter citing agency guidance set forth in the Federal Register, the "FDA considers use of the term 'natural' on a food label to be truthful and non-misleading when 'nothing artificial or synthetic . . . has been included in, or has been added to, a food that would not normally be expected to be in the food." 58 Fed. Reg. 2302, 2407 (Jan. 6, 1993). Thus, while the FDA still declines to offer a formal regulatory definition of "natural," recent enforcement activity suggests that "All Natural" label enforcement is not as low on the agency's radar as previously believed. Furthermore, even if the issue remains low on an agency public heath agenda, the warning letter only highlights these preservatives to prospecting plaintiffs' attorneys.
Expectations and Issues to Address in 2012
This year, the California Supreme Court boiled down consumer protection enforcement in the state to two simple words: "Labels matter." Kwikset, at 328. Actual risks to public health and the reality that all consumers of a product received a perfectly good, competitively priced item are not the primary focus of California consumer protection laws.
In California, the recent rulings and the continuation of "All Natural" class action filings across so many product lines suggest that the lawsuits will continue into the future. The FDA's recent warning letter did not dispel this concern, and some may say it only highlighted an area of litigation for prospecting plaintiffs in the future.
Given the expectation that costly "All Natural" class action litigation will continue in California in 2012, companies should review their products and labeling for synthetic preservatives or artificial ingredients included in or added to the food, so that product labeling is accurate and conforms to the FDA's policy. If litigation is unavoidable, companies should consider the development of defenses such as preemption, but since many "All Natural" cases through 2011 have progressed beyond the pleading stage, aggressive discovery targeting class issues of ascertainability, commonality, typicality, and the appropriateness of class treatment should be pursued at the earliest possible time.
Finally, companies should focus on early commitment to a reasonable theme. Class litigation can be costly, but companies can avoid or defeat the class action with the right preparation.
For additional information on this or any related topic, please contact a key contributor.