Assuming Vermont's GMO labeling law survives a court challenge, beginning in July, 2016, all producers of food products sold in Vermont that contain genetically modified ingredients will be required to label the products as containing GE ingredients (unless the GE component is below 1 percent of the total weight of the product). The label must be “clear and conspicuous” and must be no smaller than the size of the words “Serving Size” on the “Nutrition Facts” label required by federal law.

There will be three (3) labeling options: “Produced with Genetic Engineering”; “Partially Produced with Genetic Engineering”; and “May be Produced with Genetic Engineering.” Producers can use the label “Partially Produced with Genetic Engineering” if the product contains less than 75 percent GE material by weight. Producers can use the label “May be Produced with Genetic Engineering” only if the manufacturer does not know, and cannot reasonably determine in good faith and with due diligence, if the ingredients are genetically engineered. The Vermont Attorney General can determine whether a producer has used good faith in using this option. A producer is exempt from the labeling requirement if it obtains sworn affidavits from its suppliers that the ingredients are not genetically engineered or GMOs.

Retailers who sell raw commodities that contain or are the product of genetic engineering (e.g., raw corn in the produce section at the supermarket) must also label the product at the point of sale.

Producers/retailers are free, if they wish, to include a disclaimer that the U.S. Food and Drug Administration does not consider genetically engineered food to be materially different from non-GE food.

In addition to having to label their products, as described above, producers of food products containing GE ingredients cannot use the word “natural” or words of similar import (e.g., “all natural” or “naturally made”) on the product.

There are significant exceptions to the law. Pure meat and dairy products are completely exempted, as are alcoholic beverages. Food intended for immediate consumption (e.g., restaurant food, deli food, take-out, etc.) is also exempted. Also, food products containing small amounts of GE ingredients that are only used as processing aids do not need to be labeled. Lastly, also exempt are products that have been certified as “organic” or GE-free by an organization acceptable to the Vermont Attorney General (e.g., the Non-GMO Project).

The Vermont Attorney General is empowered to investigate and enforce the law.

Compliance with this law could be extremely challenging for both national and local food producers, for a variety of reasons. For national food producers, compliance with the law could mean: a) labeling ALL of their products nationwide just to comply with the Vermont law, even though Vermont constitutes only a tiny subfraction of the national market share; or b) specially-labeling the package on products intended exclusively for the Vermont market (if it is even feasible to do so), or c) changing their distribution systems to keep non-labeled products out of the Vermont market. Some observers have wondered whether some national producers will simply no longer ship their products into Vermont, rather than create special packaging and distribution just for the tine Vermont market.

For small or local producers, it could be an extreme hardship to: a) determine if their ingredients are genetically engineered, and/or then b) attempt to source only non-GE ingredients for their products. In addition, what if a national producer relabels its product to comply with Vermont law, but then a neighboring state passes a GMO labeling law with different labeling requirements than Vermont's? How many different state-specific packages would a national producer have to make for a single product?

Of course, the constitutionality of the law is currently being challenged in federal court by food manufacturers, and a decision in the lawsuit is pending.


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Three recent decisions from two judges in the Northern District of California provide us with a lot of information regarding where food labeling cases are headed in terms of class certification strategy. Notably, two of the decisions are from Judge Lucy Koh and granted class certification.  Of course, these losses from the defense perspective are disappointing, but it is important to understand them in order to develop effective defense strategies. The third decision is from Judge Charles Breyer and denied class certification. That opinion shows us strategies that work from the defense perspective. In addition, however, the opinion is also interesting because Judge Breyer recognizes the Northern District of California’s status as the epicenter of these cases and because he often expressly acknowledges that his reasoning differs from Judge Koh’s.  So bear with me as we go through three important class certification decisions before identifying some best practices for defendants in these types of claims.

Two Losses for the Defense, but Important Lessons to Learn.

In Werdebaugh v. Blue Diamond Growers, No. 12-CV-2724-LHK (N.D. Cal. May 23, 2014), Judge Koh granted class certification when the plaintiff alleged that he purchased the defendant’s almond milk that allegedly had misleading labels.  That plaintiff contended that using “evaporated cane juice” rather than “sugar” on the label was deceptive and that the phrase “all natural” was deceptive because the products contain potassium citrate.  I won’t address every aspect of this decision but will focus on the ones of most interest to defendants.

That plaintiff had standing to challenge those aspects of the labels because he contended he would not have purchased the almond milk had he known about the misbranding. He contended that the “all natural” label was a substantial reason why he bought the product as well. As to “evaporated cane juice,” Judge Koh distinguished to earlier decisions from the Northern District of California and found that it was plausible for this plaintiff to contend that he did not understand what “evaporated cane juice” meant when he purchased the products. At that point, the court turned to the requirements of Rule 23.

In a minor victory for the defendants, the court refused to certify and injunctive relief class under Rule 23(b)(2). That plaintiff did not allege or even attempt to establish that he intends or wants to purchase these almond milk products in the future. That meant there was no likelihood of future injury to him that could be redressed through injunctive relief.

Turning to the requirements of Rule 23(a), Judge Koh rejected the defendant’s argument that the class was not ascertainable. She concluded that a class is ascertainable so long as it is defined with “objective criteria” and if it is administratively feasible to determine whether a particular member is in the class. Class membership hinged on objective criteria, i.e., purchasing the almond milk products during the class period.  While other courts have held that a class is not ascertainable when there are no corporate records to identify product purchasers or when the purchases are so small that consumers are not likely to have records of them, Judge Koh rejected that approach. She relied on the facts that all purchasers of the almond milk products are within the class definition and all cartons of the products or the alleged mislabeling.  Moreover, “[t]he class period here is also far shorter than in [an earlier case], and inviting plaintiffs to submit affidavits attesting to their belief that they have purchased a carton of Blue Diamond almond milk in the past several years is much likelier to elicit reliable affidavits then asking potential class members to recall whether they had smoked 146,000 of a certain cigarette over the course of several decades.”  [Slip Op. at 20]  

As to Rule 23(b)(3), the court refused to certify a nationwide class because it concluded that the law of each consumer’s state of residence would apply to his or her claims. Thus, it limited the class to California consumers. 

A substantial issue was whether the plaintiff presented a damages model under California consumer protection statutes that is consistent with his liability case. The plaintiff relied on the testimony of an economist, Dr. Oral Capps, to present three damages models. The court rejected two of them. First, a full refund model was not appropriate because consumers received benefits from the almond milk even if it was mislabeled. Second, the court rejected a price premium model in which Dr. Capps tried to compare the price of the Blue Diamond products to allegedly comparable products that did not have the challenged label statements. He planned to attribute the entire price difference between the Blue Diamond products and the “comparable” products to the labeling. That theory also ignored, however, that the “comparable” product also contained potassium citrate, so it was not an appropriate comparator.  Last, this price premium theory also could not account for any other differences between the Blue Diamond products and the “comparable” products that may lead consumers to pay different prices (e.g., brand loyalty, generic vs. brand name).

The court, however, accepted Dr. Capps’ third theory, a regression model. He contended that he could isolate the relationship between a dependent variable (i.e., the price of Blue Diamond almond milk) and other variables (e.g., the alleged mislabeling). Plaintiff’s expert contended he could control for regional price differences, and Blue Diamond did not introduce any evidence about how regional price differences would affect regional price changes.  And it is that price change that the regression analysis purports to measure. That is, what price movement (if any) occurred after Blue Diamond stopped using the challenged labels? Under this theory, by ostensibly controlling for all other factors that could account for the change, all of the resulting change would be attributable to the labeling.

The court did not require the plaintiff to present a regression analysis that actually works at the class certification stage rather, it only required whether he established a workable model. Indeed, Dr. Capps had yet to run his regression analysis at the time of class certification. While two other courts had excluded Dr. Capps’ testimony in prior cases, Judge Koh found it important that Blue Diamond did not question the tool of regression analysis itself.

The second decision from Judge Koh is Brazil v. Dole Packaged Foods, LLC, No. 12-CV-01831-LHK (N.D. Cal. May 30, 2014).  That plaintiff challenged the “all natural” labeling on 10 packaged fruit products.  Each product contains both ascorbic acid (a naturally occurring form of Vitamin C) and citric acid (a natural preservative derived from citrus).  Coming only a week after the Werdebaugh class certification decision, it is not surprising that the analysis in Brazil is similar.  Once again, Judge Koh rejected the defendant’s ascertainability argument. Because the alleged misrepresentations appeared on the product packaging, there was no concern that the class includes individuals not exposed to the alleged misrepresentations. She also rejected the argument that the lack of company records identifying product purchasers affected ascertainability.  Judge Koh seemed satisfied that every purchaser received the same alleged misrepresentations and the class was limited to only 10 products in a specified timeframe.

The court certified a nationwide injunctive relief class under Rule 23(b)(2), rejecting the notion that the plaintiff’s damages were not incidental to the injunctive or declaratory relief requested. And although this plaintiff said he stopped buying Dole products months ago, he said he would remain willing to buy them now. That sufficed under Judge Koh’s analysis.

As to the Rule 23(b)(3) class, the court again refused to certify a nationwide class based on choice of law issues. These plaintiffs also used Dr. Capps as their damages expert, so the court once again rejected a full refund model and price premium model. The court accepted the regression analysis, however, just as it had in the earlier case. Dole’s position had another wrinkle because it had refused to produce certain economic data, contending that was not needed for class certification. Judge Koh viewed that as a bit of gamesmanship. She would not allow Dole to challenge Dr. Capps’ failure to actually create a working regression model when Dole had refused to provide the economic data he contended he needed for that process.

A Defense Victory Quickly Follows.

Soon after Judge Koh’s class certification decisions, Judge Breyer denied class certification in Jones v. ConAgra Foods, Inc., No. C 12-01633 CRB (N.D. Cal. June 13, 2014).  As he noted, “[t]his district has seen a flood of such cases, in which plaintiffs have challenged, with varying degrees of success, marketing claims on everything from iced tea to nutrition bars. This Order does not—and, given their multiformity, could not—speak to the merits of all such cases.”  [Slip Op. at 1 (footnote omitted)]  So it seems Judge Breyer may not be impressed with Northern District of California’s “food court” moniker.

These plaintiffs challenged a variety of Hunt’s tomato products labeled as “100% Natural” and “free of artificial ingredients & preservatives” because they contained citric acid and/or calcium chloride. They also challenged PAM cooking spray labeled as “100% natural” because that spray contains a propellant that is not natural. Last, they challenged a variety of Swiss Miss cocoa products labeled as being a source of antioxidants.

The opinion nicely analyzes standing and typicality, exploring different plaintiffs’ deposition testimony regarding why they bought certain products, what they read on the labels, what was important to them, and what they admitted was not deceptive. I want to focus on different portions of the decision in this article, however, so I will not discuss standing and typicality in detail.

Judge Breyer uses a more stringent ascertainability standard than Judge Koh. The plaintiffs proposed having class members identify products they purchased with photographs or affidavits/declarations. The court found it infeasible to believe that consumers would recall such purchases accurately, particularly considering that literally dozens of varieties of different can sizes with different ingredients existed during the class period.  While this is a useful conclusion for defendants, plaintiffs will try to distinguish this case by noting that the products’ ingredients and labels varied during the class period. 

Judge Breyer continued rejecting class certification arguments with his Rule 23(b)(2) analysis. Each of the named plaintiffs disavowed any intent to buy the challenged products in the future. That was fatal to any requested injunctive relief.

Moving to Rule 23(b)(3) predominance was lacking because of different labeling statements and, more importantly, the plaintiffs’ failure to show uniform understandings regarding the challenged labels. In this instance, the plaintiffs used an expert who opined that the labeling statements were material. That expert, however, did not survey consumers and relied on circular reasoning. That is, she opined that the statements were material because defendants would not have included them on the labels if they were not. That did not suffice for the court. The lack of any established meaning of the word “natural” when used on food labeling truly undermined these claims. Plaintiffs’ expert did them no favors by failing to survey consumers and by admitting that some consumers do not read labels, do not care about labeling statements, and would purchase products regardless of their labels.

In the next collision with Judge Koh’s decisions, Judge Breyer rejected the same Dr. Capps’ regression analysis as Judge Koh had accepted. He believed there simply was no way to control all of the variables to conclude that the price difference was attributable to the labeling. Moreover, Dr. Capps could not identify an adequate compared for product. And, absent an accurate way to identify what each class member paid, no damages analysis could succeed. In essence, Judge Breyer would not accept the notion that Dr. Capps theoretically could create a feasible damages model using regression analysis. Rather, he wanted adequate proof that Dr. Capps had done so at this stage.

How These Decisions Guide Defendants’ Strategy. 

Using Experts.

Neither the Werdebaugh nor Brazil decisions granting class certification mentions if the defendants presented survey evidence about consumers’ understandings of “all natural,” either generally or relating to the challenged ingredients specifically (which all are naturally occurring).  These food labeling claims typically rely on California consumer protection laws.  In broad strokes, those laws require that the label be likely to mislead the reasonable consumer.  The difficulty for judges and the parties is that phrases such as “all natural” do not have a set definition.   Class action plaintiffs will use this vagueness to argue that the potential for misleading consumers is a question of fact for the jury to resolve.  Defendants in these cases will benefit from hiring experts to survey consumers to determine their understandings of the phrases at issue.  If substantial percentages of consumers do not share the plaintiff’s understanding of a phrase or disagree with it, it should be untenable to contend that the a cohesive, class-wide understanding of the phrase exists.  The label will not deceive the hypothetical “reasonable consumer.”  Such surveys may also help establish that consumers bought the products for different reasons (e.g., brand loyalty, had a coupon, wanted to try something new).  

While parties to these cases are using economists and other damages experts, retail grocery pricing experts/consultants may be useful, too.  Such experts could be outside consultants who advise retailers on pricing strategy or former pricing analysts for retailers.  Such experts may help establish that too many independent variables affect retail pricing for a regression analysis to work.  In addition to factors mentioned in the cases discussed above, several other variables exist.  For example, an individual store may need to reduce the price of a certain product due to inventory control issues during a particular time frame.  Similarly, certain consumers may pay different prices for the same product based on membership in a retailer’s “club card” program.  In fact, those types of discounts may result in the challenged product having a lower price than the comparator product at a specified time.  Those types of discounts may be the motivating factor for consumers as well.  That is, if they can purchase the challenged product at a lower price due to a “club card” membership, they may have done so.  Those types of consumers would not be misled by any labeling.

Another expert to consider is a food scientist.  This type of expert would explain that ingredients such as ascorbic acid and citric acid truly are natural ingredients, whether created in a laboratory or in nature.  There is no chemical difference.  Similarly, she can explain that research confirms the safety of genetically-modified organisms (another frequent target of such “all natural” litigation).  In theory, this type of evidence arguably relates to the merits and not class certification.  But you always want to give your judge the comfort of knowing that she is not allowing truly bad conduct to go without a remedy if she refuses to certify the class.  

Disproving Your Plaintiffs’ Allegations.

It also is important to evaluate your plaintiff’s purchasing habits and history.  As we saw in Jones, those defendants effectively used testimony from the plaintiffs to defeat class certification. Explore whether they buy other products with similar ingredients and whether they have continued to buy the challenged product even after filing suit.  See if your plaintiff will admit that the labeling statement was not important to her.    

Many grocery retailers offer membership programs to customers.  Typically, these programs track purchasing history at an individual level so the retailer may direct specific advertising and offers to that customer.  Online retailers such as Amazon likewise track customers’ order history.  Try to obtain those data to determine if your named plaintiff buys other products with ascorbic acid or citric acid despite now avowing that he tries to avoid those ingredients.  Does your plaintiff who now avows a passion for healthful food habitually purchase sugary beverages, processed snacks, or other junk food?  Such purchasing history also may have data regarding the prices that plaintiff paid for the challenged product.  Those data may show the dramatically varying prices from week to week as well as discounts that a consumer enjoyed because of membership in that type of program.

Food labeling class actions continue to be a thriving business for plaintiffs’ counsel.  Mounting strong defenses not only helps your client end the current case but also sends a message to the plaintiffs’ bar that bringing suit against your client will not be a good investment for them.   

James Smith is a partner in the Phoenix office of Bryan Cave LLP.  He is a member of the Class & Derivative Actions Client Service Group and of the Food and Beverage Team. 

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The Vermont legislature has passed a bill that mandates effective July 1, 2016, the labeling of food that contains – or might contain – genetically modified organisms (GMOs).  The Governor signed the bill on May 8.  Although two other states have passed GMO labeling bills (Connecticut and Maine), Vermont’s bill is a first-in-the-nation bill because it does not contain a “trigger” clause, as the Connecticut and Maine laws do.  The trigger clause in Connecticut’s and Maine’s laws means that those laws do not take effect until some other state’s labeling law goes into effect first.  The idea behind including a trigger clause is that it reduces the likelihood that the enacting state will be sued by the food industry because, by definition, it will not be the first state to mandate labeling.  The absence of a trigger clause in the Vermont bill has now made Vermont a lawsuit-target, and the bill raises a host of issues that could make it hard to defend in court.

The Vermont bill specifically acknowledges that the federal FDA does not consider GMO foods to be materially different from non-GMO foods.  This could be a problem in defending the law.  If the federal government does not consider GMO foods to need labeling, why should Vermont single out such products for separate treatment?

The Vermont bill asserts that scientific research is mixed on the safety of GMO foods and that GMO foods present potential health risks.  Many would say that such a statement is false and anti-science:  there have been numerous peer-reviewed, reputable scientific studies showing no safety concerns from GMO foods, and no scientifically-valid studies to the contrary.  Thus, many would say that to imply that there is real scientific disagreement over the safety of GMO foods is like saying that there is genuine scientific disagreement over the reality of global climate change. 

The Vermont bill requires foods to be labeled either:  “produced with genetic engineering,” “partially produced with genetic engineering,” or “may be produced with genetic engineering.”  Many food producers, especially small ones, including small, Vermont craft food producers, may simply not know, and may not easily be able to tell, whether their products contain GMO ingredients.  Thus, they will be forced to “stigmatize” themselves with a label that says, “may be produced with genetic engineering.” 

The labeling mandate in the Vermont bill extends not just to food manufacturers, but also to retailers, both supermarkets and to Vermont “mom and pop” grocery stores.  In the case of unpackaged agricultural products that are or might be grown from GMO seeds, the retailer must label the display shelf or bin with the words “produced with genetic engineering.”   This may constitute a hardship for small Vermont food stores.  And supermarket chains operating in Vermont are certainly not going to like it, either.

The Vermont bill contains exemptions for meat and dairy products.  While the proponents of the bill argue that this makes the bill less vulnerable to legal attack, it could work the other way around.  Critics could argue in court that the bill is flawed because it singles out a favored and politically powerful Vermont industry – dairy farming – for exemption from a labeling requirement that everyone else is required to follow.

The debate on Vermont’s bill has focused on whether GMO foods should be labeled.  But included in the bill is a prohibition on the use of the terms “natural” on GMO foods.  This provision was not the subject of any significant public debate, and, again, could create problems for the law in court.  Hundreds if not thousands of processed foods on Vermont supermarket shelves tout themselves as “natural,” and the federal Food and Drug Administration (FDA) has declined to prohibit such labeling.  Why should one state be allowed to prohibit such labeling?  Will national food producers change their labels for one state?  Should they have to?  

The Vermont Attorney General has predicted that Vermont almost certainly will be sued, and that defending the law in court could cost Vermont taxpayers millions of dollars.  Worse, if Vermont loses the lawsuit, it could end up paying the other side’s attorneys’ fees as well, which could add up to $8-10 million dollars.  For a state of only 600,000 residents, and a much smaller number of taxpayers, that could mean each Vermont taxpayer ponying up real money cash.  Proponents of mandatory GMO labeling point to surveys that show a large percentage of Vermonters favoring such labeling.  But did those surveys ask whether the respondent favored mandatory labeling if it meant that she – and every other taxpayer – might have to reach into her wallet to support the law?  Especially when considering that Vermont has a mixed track record in defending its laws when they are attacked as unconstitutional or contrary to federal law – such as the Vermont law in the 1990s that mandated the labeling of dairy products from cows injected with bovine growth hormone.  That law was struck down.  Proponents of labeling argue that consumers have a right to know.  But is this about a “right to know,” or is it instead about attempting to stigmatize GMOs out of existence through fear?

There are other potential consequences besides an expensive lawsuit from the food industry.  Vermont is a small state with a miniscule consumer base.  Will hundreds or thousands of food producers agree to separately label their products exclusively for the Vermont market, because of this law, or will they simply decide to “write Vermont off” and not sell their products in Vermont? 

Lastly, as a practical matter, did the Vermont legislature think through what effect this law have on the thousands of small Vermont craft food producers who simply don’t know whether their products contain ingredients that may be derived from GMOs?  If you can’t be certain that your product contains no such ingredients, apparently you will be forced to label it as “may be produced with genetic engineering.”  And what if these local producers are simply unable to source their ingredients from non-GMO sources?  Simply put, this cannot be good for Vermont craft food producers and, by association, the Vermont economy.  Forcing them to label their products as possibly containing GMOs could kill off many of these good, homegrown industries.

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The tide seems to be turning in favor of food labeling class action defendants with respect to the “unlawful” prong of California’s Unfair Competition Law.  The UCL provides consumers with a claim for “unlawful,” “unfair,” or “fraudulent” business practices.  Cal. Bus. & Prof. Code § 17200.  Since the California Supreme Court’s opinion in Kwikset Corp. v. Superior Court, 51 Cal. 4th 310, 246 P.2d 877 (2011), there has been no doubt that the UCL requires that a named plaintiff prove actual reliance on the challenged advertising when pursuing claims under the UCL’s unfair or fraudulent prongs.  A number of plaintiffs have argued, however, that they need not plead reliance when proceeding under the unlawful prong of the UCL.  Those plaintiffs contend that simply purchasing an “illegal” product that is misbranded in violation of California law is sufficient; thus, they need not prove that they relied on the alleged misbranding in those circumstances.  Admittedly, the decisions of some judges in the Northern District of California in food labeling class actions may support the argument that the plaintiff need not demonstrate reliance under the unlawful prong but need only allege facts showing that it is plausible that the defendant violated the law when selling a product.  E.g., Trazo v. Nestle USA, Inc., 2013 WL 4083218, *9 (N.D. Cal. Aug. 9, 2013).  

Fortunately for class action defendants, however, the trend now seems to require reliance even under the UCL’s unlawful prong.  Judge Edward Davila issued the latest such decision in Thomas v. Costco Wholesale Corp., No. 5:12-CV-02908-EJD (N.D. Cal. Mar. 31, 2014).  There, two named plaintiffs alleged that Costco improperly labeled several products.  Judge Davila granted in part the motion to dismiss and emphasized the need for reliance for such claims under the unlawful prong.  Plaintiffs pursuing these claims allege they would not have purchased a product if he or she had known that it was mislabeled contrary to California law.  Because California law also makes it unlawful for a person to hold or offer for sale any misbranded food, such plaintiffs contend that they received products that are “worthless” and have no economic value, even if those plaintiffs consumed and enjoyed the products.  See Cal. Health & Safety Code § 110760 (unlawful for person to hold or offer for sale any food that is misbranded).

The plaintiffs in Thomas presented that same type of argument and contended that they need not show actual reliance on any of the several allegedly-improper labeling statements at issue. “Plaintiffs argue that their claims are not based on misrepresentation, [but] rather on the illegality of the products themselves as their misbranding violates the Sherman Law, and therefore there is no need for plaintiffs to prove reliance.”  Thomas Slip Op. at 12.  Judge Davila rejected Plaintiffs’ arguments:  “Plaintiffs cannot circumvent the reliance requirement by simply pointing to a regulation or code provision that was violated by the alleged label misrepresentation, summarily claiming that the product is illegal to sell and therefore negating the need to plead reliance.”  Id. As a backstop to the reliance issue, those plaintiffs also argued that they “relied on Defendant not to sell them illegal products (i.e., products misbranded under state law).”  Id. at 13.  The Court also rejected that proposition—Plaintiffs must plead and prove reliance “on the representation,” not on an implied assurance of “legality.”  Id.   

To be sure, Thomas is not a home run for class action defendants.  It denied the motion to dismiss as to several claims.  But it is an important addition to the growing line of cases holding that actual reliance is necessary under the UCL’s unlawful prong.  E.g., Gitson v. Trader Joe’s Co., 2014 U.S. Dist. LEXIS 33936, at *26 (N.D. Cal. Mar. 14, 2014) (holding that plaintiffs must demonstrate actual reliance); Kane v. Chobani, Inc., 2014 U.S. Dist. LEXIS 22258, at *22-23 (N.D. Cal. Feb. 20, 2014) (same).  

Some plaintiffs are successfully arguing that allegedly-illegal labels on certain products also support claims for breach of the implied warranty of merchantability.  They do not contend that they relied on any particular statements to support those claims.  Rather, they allege that they would not have purchased products that could not be legally sold or held, and that the defendant impliedly warranted that the product was “legal.”  These plaintiffs consumed and, apparently, enjoyed the products despite their “illegality,” and the products performed as expected (i.e., they could be safely consumed), so the notion of any sort of breach warranty shouldn’t apply.  With this continuing trend of requiring actual reliance under the UCL’s unlawful prong, I hope that these implied warranty claims also begin falling by the wayside.  It seems untenable to suggest that warranty claims can succeed where consumer fraud claims—which have broader remedial and ameliorative public policy purposes—fail.  
James Smith is a partner in the Phoenix office of Bryan Cave LLP.  He is a member of the Class & Derivative Actions Client Services Group and a member of the Food and Beverage Team.   

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Two recent district court decisions emphasize that food labeling class action defendants must carefully review complaints to identify what each named plaintiff contends it reviewed and whether the allegedly deceptive statements even affected the named plaintiff’s decision to purchase a product. These plaintiffs often string together unrelated allegations that have nothing to do with their purchases.  If a defendant connects the dots and shows just how unrelated those allegations are, you have a much better chance of succeeding early in the case.      

The first case involves five gallon bottled water that is municipal tap water that the seller put through a purification process.  In the Chicago Faucet Shoppe, Inc. v. Nestle Waters North America, Inc., No. 12 C 08119 (N.D. Ill. 2/11/14), the plaintiff alleged that the defendant failed to disclose that the water is municipal tap water and not natural spring water.  After buying the bottles for years, that plaintiff realized it was simply purchasing municipal tap water that underwent a purification process.  That defendant apparently referred to “spring water” on its website, invoices, and panels on its delivery trucks. Importantly, it did not include that statement on its labels. That was crucial for purposes of the defendant’s preemption argument. Federal regulations exempt “purified water” from disclosing if the water comes from a community water system.  21 C.F.R. § 165.110(a)(3)(ii) & (a)(2)(iv).  In fact, the FDA considered but rejected requiring disclosure for purified water, concluding that consumers purchasing it were more concerned with purity and not the source.
This plaintiff knew it couldn’t force the defendant to add more to its label than federal law required. Instead, it argued that it only wanted the defendant to disclose the source in marketing materials and on invoices. But marketing really is no different than labeling. The federal Food Drug & Cosmetic Act prohibits states from imposing any food labeling that is not identical to a federal standard.  Because the federal regulations do not require “purified water” to disclose if it came from a municipal water source, federal law preempted this plaintiff’s claims even though it framed the targeted materials as marketing materials rather than labeling.  
You may wonder why the plaintiff did not allege affirmative fraud based on statements on the website and invoices referring to Ice Mountain “spring water.”  Indeed, the court wondered the same thing, so it analyzed (and rejected) an affirmative misrepresentation claim even though the plaintiff did not plead it.  Of course, the most likely reason that the plaintiff did not pursue an affirmative misrepresentation claim is the near impossibility of getting such a class certified.  The court did not touch on that issue, but anyone familiar with consumer fraud class actions certainly recognizes it.  If the plaintiff built its case on specific statements on the website or on invoices, it would have to explain how the court could certify a class without getting mired in individual issues of who saw the website, who relied on it, and what other sources of information they possessed.  That is why these types of food labeling claims tend to rely entirely on the product labeling as opposed to occasional statements on websites or other places.  
The next case is Kane v. Chobani, Inc., No. 12-CV-02425-LHK (N.D. Cal. 2/20/14).  This case is familiar to people following food labeling class actions and began in May 2012.  Since then, the court has granted various motions to dismiss but allowed that plaintiff more opportunities to plead cognizable claims. At this point, the plaintiff was on her fourth attempt and, thankfully, it is the last one.  This case is a little more typical because it is in the Northern District of California and relies on California consumer protection laws.  This plaintiff has been pursuing claims falling into two categories.  The first relates to Evaporated Cane Juice (“ECJ”); she alleges that ECJ is nothing more than sugar or dried can syrup, so referring to ECJ on the label is misleading and violates federal regulations requiring manufacturers to refer to ingredients by their common and usual names.  The second class of claims are “all natural” claims.  She alleges that using fruit and vegetable juice and turmeric for color was false and misleading because those are not “all natural.”
One of the most useful portions of this order is its discussion of California UCL claims under that statute’s “unlawful” prong.  Some plaintiffs have successfully argued that they need not rely on a labeling statement that is “unlawful”; rather, they only need to plead that it is plausible that a defendant broke a law (typically, a federal food labeling requirement).  In fact, a handful of other courts in the Northern District of California have accepted that rationale.  But Judge Lucy Koh was having none of it.  She reasoned that any UCL named plaintiff must allege that they relied on the offending statement or conduct, even under the “unlawful” prong.  This will be a developing area under California consumer fraud law.  At some point, the California Supreme Court or the Ninth Circuit will resolve this growing split among lower courts interpreting allegations of “unlawful” conduct and UCL claims.  For now, unfortunately, the outcome in such cases may turn on which judge handles a particular case.  
The court then analyzed whether this plaintiff actually relied on the alleged misstatements. This really is an interesting portion of the opinion, particularly considering how Judge Koh evaluated the plaintiff’s changing allegations over the course of the case.  As to ECJ, the plaintiff initially contended she did not realize that ECJ was just another sweetener.  But in other portions of the amended pleading, the plaintiff repeatedly referred to sugar and dried cane syrup interchangeably.  Judge Koh did not believe it was plausible that the plaintiff could realize that “dried cane syrup” was a form of sugar, but that “evaporated cane juice” was not.  Similarly, the plaintiff earlier sought a preliminary injunction (perhaps an unwise move) and submitted a declaration indicating she would not have purchased the product if she knew it contained “dried cane syrup”; again, this showed she knew that dried cane syrup was the same as sugar.  And despite the court’s earlier rulings, this latest pleading failed to explain how the plaintiff could understand that dried cane syrup was a form of sugar but was oblivious to that fact regarding ECJ, particularly considering that she purported to read and rely on the label.  
Perhaps showing some desperation, the plaintiff and her counsel suggested that the “cane” in ECJ could have referred to some other type of cane, such as bamboo cane or sorghum cane.  But during the hearing on the plaintiff’s preliminary injunction motion (again, probably not a good idea), the plaintiff’s counsel admitted that he does not know what people might think when they see ECJ on a label or whether they may believe it is something other than sugar cane.  It was too much for Judge Koh, who found the “which cane is it” argument to be nonsensical.    

The plaintiff also tripped over her own allegations because she acknowledged that “fruit juice concentrate” is a well-known added sugar.  In light of that admission, it was implausible that the plaintiff thought “evaporated cane juice” was something healthful when she admittedly knew that “fruit juice concentrate” was little more than sugar.  Juice was juice from the court’s perspective.
The court then turned to the “all natural” claims that relied on Chobani using fruit or vegetable juice concentrate as coloring.  The defendant’s labeling explicitly disclosed that it adds fruit or vegetable juice for color, and the plaintiff purported to read the label.  Hoping to salvage this claim, the plaintiff now alleged that the juices added were actually processed, unnatural substances. The court was not impressed.  In three prior complaints and several hearings, the plaintiff never before disclosed a theory that the juice concentrate used for coloring somehow was not “natural” due to some unidentified aspect of its processing.  It was not enough that the plaintiff alleged the juices were “highly processed unnatural substances far removed from the fruits or vegetables they were supposedly derived from”; that was nothing more than a conclusory statement without any factual support.  Judge Koh wanted to know how or why the juices were not natural, and this plaintiff never answered that question despite several opportunities.
Some take away points from Chicago Faucet Shoppe and Kane to consider:
  • In terms of substantive law, reliance and the “unlawful” prong of California’s UCL needs clarifying.  The Northern District of California likely is the federal court with the greatest volume of such claims, and some of its judges are split on whether a named plaintiff must have relied on the allegedly-unlawful statement.  
  • Dissect the plaintiff’s allegations and take the court step-by-step to identify: (1) what the plaintiffs actually saw or relied on; (2) what they included in the complaint as “fluff” (e.g., perceived bad facts that didn’t play a role in their purchase); (3) how their allegations may disprove their claims (e.g., they admit elsewhere that a listed ingredient is known to be “unnatural”); (4) conclusory assertions about ingredients that lack factual bases (e.g., something is “unnatural,” but the plaintiff doesn’t describe how or why); and (5) implausible assertions—courts are slowly showing more willingness to recognize that a label didn’t deceive a plaintiff merely because he or she alleged as much.      
Food labeling cases continue to be a favorite among the plaintiffs’ class action bar.  No doubt, the initial success in surviving motions to dismiss—often followed by quick class-wide settlements—encouraged them. Many courts, however, seem to be taking a closer and more skeptical view of these claims.
James Smith is a member of the Bryan Cave Food and Beverage Team and of the Class and Derivative Action Client Service Group.  He is a partner in the firm’s Phoenix office.     

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A recent decision from the Northern District of California provides defendants with reason for cautious optimism regarding food labeling class actions.  In Sethavanish v. ZonePerfect Nutrition Co., No. 12-20907-SC (N.D. Cal. Feb. 13, 2014), the court denied the plaintiff’s motion for class certification. That plaintiff alleged that the “all natural” representations on ZonePerfect bars were false and misleading because the bars contain at least one of ten specified non-natural ingredients.  The plaintiff alleged that she regularly purchased those bars for her then-fiancé, who was an active-duty Marine who eventually deployed overseas.  The plaintiff alleged that she and her fiancé relied on those representations and paid more for the ZonePerfect bars than she would have paid for other bars that were not all natural.  She alternatively alleged that she would have purchased another brand of nutrition bar that truly was all natural.

In ruling on class certification, the court first addressed whether the plaintiff had standing to bring her claims.  While the court’s ruling in this regard is not helpful to defendants, it is also not surprising.  The defendant argued that the plaintiff did not suffer any injury because its bars are less expensive than the Pure Protein bars that the plaintiff now purchases.  The defendant also noted that the plaintiff admitted that she and her fiancé were willing to purchase non-natural nutrition bars so long as they were less expensive than “all natural” alternatives.  Plaintiff also admitted that she has always been willing to eat foods with artificial and synthetic ingredients.  While the court saw some tension among the plaintiff’s declaration, her pleadings, and her deposition testimony, that tension was not enough to eliminate standing.  From the court’s perspective, “[i]t is enough that she has asserted that she would not have purchased the product but for Defendant’s alleged misrepresentation.  She bargained for a nutrition bar that was all natural, and she allegedly received one that was not.”  Again, the standing threshold is not a terribly difficult one to overcome, so this ruling is not too surprising.  
More helpful for defendants, however, is the court’s ruling on ascertainability.  The court agreed with the defendant that the plaintiff could not define an objectively ascertainable class.  The defendant overwhelmingly sells to retailers, and not directly to consumers.  Records could only identify a very small fraction of consumers who purchased ZonePerfect bars in the last several years.  Thus, no method existed to identify the members of the class.  
The district court noted that courts in the Ninth Circuit are split on the issue.  It cited Xavier v. Philip Morris USA, Inc., 787 F. Supp. 2d 1075 (N.D. Cal. 2011), as an example of a case concluding a class could not be certified when there is no way to ascertain class membership.  That court declined to rely on affidavits from potential class members, reasoning that such a procedure could invite fraudulent or inaccurate claims.  In that respect, the Third Circuit’s opinion in Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013), also was instructive.  There, the Third Circuit found that retailer records were not sufficiently thorough or accurate to identify class members.  In addition, the Carrera court “held that fraudulent or inaccurate claims could dilute the recovery of absent class members, and, as a result, absent class members could argue that they were not bound by a judgment because the named plaintiff did not adequately represent them.”  The court also pointed to Ries v. AriZona Beverages USA LLC, 287 F.R.D. 523 (N.D. Cal. 2012), as an example of a court rejecting a defendant’s ascertainability argument when dealing with “all natural” claims.  Nonetheless, this court found the reasoning in Xavier and Carrera more persuasive.  While those cases may restrict types of consumer class actions that may be certified, they do not bar such classes altogether.  Because this plaintiff did not identify any method to determine class membership, let alone an administratively feasible method, the court denied class certification without prejudice.  
One effect of such decisions may be to encourage class counsel to try to certify narrower classes.  For example, if a manufacturer sells directly to consumers through its website, a class action plaintiff may contend that a court could certify a class of those consumers.  Of course, that assumes that the manufacturer maintains adequate records of such customers.  Similarly, class representatives may argue that the court may certify a class of consumers who purchased the products at retail locations with robust consumer loyalty programs.  Those types of programs often track individual customer’s purchases, though the extent of data maintained varies considerably. This is not to say that such narrowed classes would be appropriate.  They would bring a host of other difficult issues.  Nonetheless, it would not be surprising to see plaintiffs resort to that tactic in hopes convincing a court to certify a class.  Such class certification would, of course, provide the type of leverage that class counsel seek to negotiate a broader settlement.  

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A recent federal court decision rejected a preemption argument under the Food, Drug, and Cosmetic Act and the Nutrition Labeling and Education Act regarding Smart Balance “fat-free” milks.  Admittedly, those defendants advocated a novel preemption theory.  It also did not help that a competing product used labeling that the plaintiffs acknowledged complied with all federal laws and would not provide a basis for state law claims.

In Koenig v. Boulder Brands, Inc., No. 13-CV-1186 (ER) (S.D.N.Y. Jan. 31, 2014), the plaintiffs alleged that the defendants deceptively labeled milk products as “fat free” when they truly contained one gram of fat per serving.  The defendants added an Omega-3 oil blend to fat-free milk, so the product contained less than 0.5 gram of milk fat per serving, but contained one gram of fat per serving due to adding the oil blend.  As is common in these types of claims, the plaintiffs alleged that the “fat-free” labeling deceived them and that they paid a premium for the products because of that deceptive labeling.
While the product labeling touted the “fat-free” nature of the milk, the front label also disclosed that it contained “(1 g fat from Omega-3 oil blend),” albeit in smaller font.  Of course, the nutrition facts panel also disclosed that the milk contained one gram of fat per serving, and the oil blend was the third ingredient listed. Unfortunately for the defendants, however, the nutrition facts panel did not contain an asterisk or disclaimer modifying that description.  As we will see below, that was an important omission from the court’s perspective.
It is well-recognized now that states cannot impose labeling requirements different from those imposed by the Food, Drug, and Cosmetics Act (“FDCA”) and the Nutrition Labeling and Education Act (“NLEA”).  Federal law, however, does not preempt state laws that only impose identical labeling requirements.  A state consumer law may provide a claim even though the relevant federal laws do not provide any private remedies for consumers.  Thus, these plaintiffs had to establish that their state law claims only imposed the same obligations as federal law, while the defendants argued the opposite.
Not surprisingly, a specific regulation regarding labeling of “fat free” products exists.  Under that regulation, products labeled as “fat free” and that have an added ingredient consisting of fat must have an asterisk next to the ingredient and a statement along the lines of, “adds a trivial amount of fat,” “adds a negligible amount of fat,” or “adds a dietarily insignificant amount of fat.”  21 C.F.R. § 101.62(b)(ii).  That is why the lack of an asterisk came back to haunt these defendants.
The defendants argued, however, that FDA compliance policy guides allowed them to treat this milk product essentially as two combined products—one that is “fat-free milk” and the other that is not fat-free Omega-3 oil.  The defendants pointed to such policy guides regarding water with added minerals and peas and carrots.  No such guidance existed for a “fat-free” product with added fat, though.  The court rejected the argument that the policy guides for other products somehow pointed to preemption here.  After all, no policy guide exists for this type of milk product, and a competing milk product appropriately uses the asterisk to note added oil.  In fact, the court could not find any FDA policy guide involving combining an ingredient that is fat with a “fat-free” food.  Considering that a regulation specifically addresses such situations of adding fat to “fat-free” foods, there was no reason to try to analogize to other policy guides for different types of food.  Thus, the court concluded that the plaintiffs’ claims only sought to impose requirements that were identical to federal law.
The court then turned to the sufficiency of the state law claims.  First, the plaintiffs alleged consumer fraud under New York’s General Business Law (“GBL”) § 349.  That law relies on an objective test to assess whether practices are likely to mislead reasonable consumers acting reasonably under the circumstances.  The court noted that a reasonable consumer may conclude that the product contains a gram of fat per serving, but also noted that a reasonable consumer might focus on the more prominent wording on the label touting the product as “fat-free milk and Omega-3s.”  That was enough to defeat the motion to dismiss.  The court also concluded that the plaintiffs adequately alleged injury because they contended that they paid price premiums based on the defendants’ misrepresentations.
The court dismissed the plaintiffs’ breach of express warranty claims, however, due to the lack of privity.  It did so without prejudice, so the plaintiffs may attempt to replead that claim.  It seems difficult, however, to conceive of retail plaintiffs buying products directly from the manufacturers, rather than from a grocery store.  The court also dismissed the plaintiffs’ unjust enrichment claims as duplicative of other claims.
At this point in food and beverage labeling class actions, several courts have ruled on preemption issues and provide fairly consistent guidance on that doctrine.  That guidance, of course, cuts both ways for manufacturers—plaintiffs have fairly clear road maps for how to plead claims to avoid preemption.  More interesting questions, and perhaps more successful defenses, will arise in later proceedings such as summary judgment and class certification.  For example, nearly every state’s consumer fraud laws purport to rely on an objective standard.  That is, what would the reasonable consumer believe or would the labeling deceive the reasonable consumer?  It is not clear how class action plaintiffs intended to satisfy this burden in many respects.  Labels typically disclose the relevant information even when a plaintiff seizes on only one portion of the label (e.g., “fat free” or “all natural”).  It should not be sufficient for class action plaintiffs to rely only on the named plaintiff’s subjective interpretations.  There should be some requirement that they establish that a “reasonable” consumer would not have read other portions of the label, would not have understood them correctly, or would have disregarded them.  This seems particularly difficult to do and, at a minimum, should require statistically significant and valid survey data regarding consumer perceptions of the labels.  If a plaintiff does not offer that type of survey, a defendant should have grounds for summary judgment or to defeat class certification.
Another issue that these types of plaintiffs do not thoroughly address is injury due to alleged “premium” payments.  In sum, plaintiffs argue that they paid more for a mislabeled product than they otherwise would have.  That tends to be the entire measure of damages proffered by these types of class actions.  But this should be a difficult proposition to prove.  Grocery prices vary significantly depending on several factors.  Was the product on sale?  Did a customer belonging to a store’s “membership” program buy the product at a price lower than that for a non-offending product because of that membership?  Did a customer buy the product because her preferred alternative product was sold out?  Any number of differences may explain (1) whether a consumer actually paid a “premium” price and (2), if so, whether she paid that price because of the labeling or for unrelated reasons.  The United States Supreme Court’s recent decision in Comcast Corp. v. Behrend, 133 S. Ct. 1426 (2013), gives class action defendants considerable ammunition to attack plaintiffs’ proposed methodologies for establishing injuries and damages.  That ruling should play a significant role in defending any of these labeling class actions.
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Contrary to popular belief–even among some lawyers–off-label use is not necessarily entirely off-label.  That’s a good thing, too. One of the things we’ve harped on with this blog is that off-label use is legal, common, and in various fields can represent the prevailing medical standard of care.

One thing we’ve never argued on this blog is that off-label use (or any use) of prescription medical products is risk free.  Thus, in cases of widespread off-label uses, by all means the FDA should have the ability to ensure (as is the case with labeled uses) that a product’s labeling informs prescribing doctors of relevant risks.  The alternative view that we encountered back in the Bone Screw litigation (flirted with by the Kessler-era FDA), that warnings pertaining to off-label uses were somehow “promotion” and should be prohibited, always struck us as illogical and counterproductive.

It turns out that the FDA can indeed require warnings about off-label uses.

With prescription drugs, the Agency’s authority to order warnings about off-label uses is pretty well spelled out and straight-forward. The relevant regulations provide:

A specific warning relating to a use not provided for under the “Indications and Usage” section may be required by FDA in accordance with sections 201(n) and 502(a) of the act if the drug is commonly prescribed for a disease or condition and such usage is associated with a clinically significant risk or hazard.

21 C.F.R. §201.57(c)(6)(i) (emphasis added). 

A specific warning relating to a use not provided for under the “Indications and Usage” section of the labeling may be required by the Food and Drug Administration if the drug is commonly prescribed for a disease or condition, and there is lack of substantial evidence of effectiveness for that disease or condition, and such usage is associated with serious risk or hazard.

21 C.F.R. §201.80(e) (emphasis added).  The references in §201.57 to sections 201(n) (21 U.S.C. §321(n)) and 502(a) (21 U.S.C. §352(a)) of the FDCA are to general provisions relating to misbranding.

Thus “[i]n addition to warning about risks from approved uses, the FDA has authority to impose warnings about off-label or unapproved uses when there is evidence of a clinically significant risk.”  Bailey v. Wyeth, Inc., 37 A.3d 549, 556 (N.J. Super. Law Div. 2008) (emphasis added), aff’d, 28 A.3d 1245 (N.J. Super. App. Div. 2011) (citing §201.57 as authority for off-label drug warnings); see Harris v. Amgen, Inc., ___ F.3d. ___, 2013 WL 5737307, at *6 (9th Cir. Oct. 23, 2013) (same authority); Richardson v. Miller, 44 S.W.3d 1, 11-12 (Tenn. App. 2000) (same authority).  Thus, it’s apparent from the face of the FDA’s regulations that the Agency has authority to order prescription drugs to carry warnings relating to off-label uses.

Now for the kicker.  The express language of these regulations – “required by” the FDA – places warnings about off-label uses in the prescription drug context squarely within the realm of “impossibility” preemption under the Levine-Mensing-Bartlett line of Supreme Court authority, since off-label use warnings are not something that a drug manufacturer can add to its label unilaterally without prior FDA approval.  We’ve explained that rationale in greater detail here as to other types of label changes that require the Agency’s prior approval.  It’s also the same reasoning that requires preemption in the context of black box warnings, as we’ve discussed here and here.  So, if a plaintiff is demanding warnings about off-label uses, the defense has a preemption defense.

With medical devices, the FDA’s authority to add off-label information to labeling is not as explicit, but nonetheless present, as the FDA itself states here:

During its review, FDA may seek a statement in the labeling that there is a lack of evidence that a device is effective for an off-label use or indication.  The [summary of safety and effectiveness data] should contain an explanation of the basis for such limitations.
FDA, ODE, “Summary of Safety and Effectiveness Data (SSED) − Clinical Section Checklist,” at 6 (June 10, 2010) (emphasis added).
Why devices should be regulated differently from drugs with respect to off-label warnings is unclear, but we speculate that it might be related to 21 U.S.C. §396, which expressly forbids the FDA from regulating off-label use as a medical practice (FDA can’t restrict “the authority of a health care practitioner to prescribe or administer any legally marketed device to a patient for any condition or disease”).  Still, §396 expressly maintains existing FDA authority over device “labeling,” and putting something in a manufacturer’s label hardly amounts to restricting the practice of medicine.  As we’ve discussed before, FDA-approved labels don’t define medical standards of care.  Labeling is one of many sources of information that physicians may, in their discretion, consult.
The only thing we found in the device field similar to §§201.57 and 201.80 was 21 U.S.C. §360c(i)(E)(i), which gave the FDA express authority to order off-label warnings for substantially equivalent (§510k) medical devices:

[T]he director of the organizational unit responsible for regulating devices . . . may require a statement in labeling that provides appropriate information regarding a use of the device not identified in the proposed labeling if . . . there is a reasonable likelihood that the device will be used for an intended use not identified in the proposed labeling for the device; and . . . such use could cause harm.

However, by its terms that subsection “has no legal effect after the expiration of the five-year period beginning on November 21, 1997.”  21 U.S.C. §360c(i)(E)(iv).  So, with that provision expired for over a decade, what is the sourse of the FDA’s (plainly exercised) power to require warnings pertaining to off-label uses of medical devices?

The necessary FDA authority resides in 21 U.S.C. §360j(e) regarding “restricted devices.”  That section creates the concept of prescription-only devices, but does more than that:

(e) Restricted devices

(1) The Secretary may by regulation require that a device be restricted to sale, distribution, or use −

(A) Only upon the written or oral authorization of a practitioner licensed by law to administer or use such device, or

Emphasis added.  That’s the prescription-only part, but Part B of the same section of the FDCA also extends the FDA’s device labeling power:

(B) Upon such other conditions as the Secretary may prescribe . . . if, because of its potentiality for harmful effect or the collateral measures necessary to its use, the Secretary determines that there cannot otherwise be reasonable assurance of its safety and effectiveness. . . .  A device subject to a regulation under this subsection is a restricted device.

(2) The label of a restricted device shall bear such appropriate statements of the restrictions required by a regulation under paragraph (1) as the Secretary may in such regulation prescribe.

Emphasis added.  Thus under §360j(e) the FDA can impose “other conditions” on medical devices by regulation, and such “conditions” can require “appropriate statements” on the labeling of such devices.

The FDA has just such a regulation for “restricted devices,” which it defines as 
a device for which a requirement restricting sale, distribution, or use has been established by a regulation issued under section 520(e) of the act [§360j(e), quoted above], by order as a condition of premarket approval under section 515(d)(1)(B)(ii) of the act, or by a performance standard issued in accordance with sections 514(a)(2)(B)(v) and 514(b) of the act.

21 C.F.R. § 807.3(i) (emphasis added).  Notably, the “restricted device” definition not only includes devices with “requirements” imposed at the time of the PMA process, but also devices subject to FDA “performance standards.”

Now, finally, here is the substantive FDA labeling regulation authorized and required by 21 U.S.C. §360j(e).  As you can see, it’s plenty broad enough – and expressly includes warnings:

(a) FDA may impose postapproval requirements in a PMA approval order or by regulation at the time of approval of the PMA or by regulation subsequent to approval.  Postapproval requirements may include as a condition to approval of the device…

*          *          *          *

(3) Prominent display in the labeling of a device and in the advertising of any restricted device of warnings, hazards, or precautions important for the device’s safe and effective use … on risks and benefits associated with the use of the device.

21 C.F.R.  814.82(a) (emphasis added).

Thus the FDA’s power to order changes in the labeling of “restricted devices” covers just about any aspect:

(b) In specifying the labeling or change in labeling or change in advertising . . . eliminate or reduce the risk of illness or injury or the danger to the health of individuals, the Commissioner may require the manufacturer . . . responsible for the labeling or advertising of the device to include in labeling for the device, and in advertising if the device is a restricted device, a statement, notice, or warning.  Such statement, notice, or warning shall be in the manner and form prescribed by the Commissioner and shall identify the . . . risk of illness or injury or the unreasonable, direct, and substantial danger to the health of individuals associated with the device as previously labeled.

21 C.F.R. §895.25(b) (emphasis added).  That’s a lot of “shalls” and “requires.”

So, is this just the speculation of defense-oriented DDLaw bloggers?

Nope, we’re not making this up.  Rather, both the FDA and those courts that have addressed the topic of off-label warnings for medical devices rely on these regulations.  For example, in an early medical device preemption case, predating Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), the court extended preemption to labeling claims involving off-label use on this basis.

[T]he FDA can require a manufacturer to provide additional labeling that addresses potential off-label uses.  21 C.F.R. §895.25.  Consequently, the fact that [defendant’s] implant might have been used for an off-brand purpose is not sufficient to distinguish this case from [cases not involving off-label use].

Reeves v. AcroMed Corp., 44 F.3d 300, 305-06 (5th Cir. 1995) (emphasis added); see In re Orthopedic Bone Screw Products Liability Litigation, 1996 WL 221784, at *6 (E.D. Pa. Apr. 8, 1996) (“[t]hrough [§895.25(a)] the FDA regulates off-label uses of medical devices”); McGuan v. Endovascular Technologies, Inc., 106 Cal. Rptr.3d 277, 281-82 (Cal. App. 2010) (FDA’s power under §360j(e) to “condition its approval on adherence to various requirements” resulted in preemption of all claims, including for “off-label promotion”); see generally Carson v. Depuy Spine, Inc., 365 F. Appx. 812, 814 n.1 (9th Cir. 2010) (FDA “is free to impose device-specific restrictions by regulation.  §360j(e)(1).”); Caplinger v. Medtronic, Inc., 921 F. Supp.2d 1206, 1211 (W.D. Okla. 2013) (same); Wilhite v. Howmedica Osteonics Corp., 833 F. Supp.2d 753, 756 (N.D. Ohio 2011) (same).

In 2011, well after the expiration of 21 U.S.C. §360c(i)(E), the FDA cleared a §510k device, but imposed a black box warning pertaining to an off-label use.

FDA has determined that in order to provide reasonable assurance of safety and effectiveness, it is necessary to restrict the [device] to sale, distribution, and use with labeling, advertising, and promotional material that bears a warning statement in a black box that alerts users to the risk associated with off-label use. . . .  However, FDA believes it is necessary to require this warning in labeling and advertising by restricting the device under section 520(e) of the Federal Food, Drug, and Cosmetic Act (FD&C Act) (21 U.S.C. §360j(e)).

“Medical Devices; Ovarian Adnexal Mass Assessment Score Test System; Labeling; Black Box Restrictions,” 2011 WLNR 26903209 (FDA Dec. 30, 2011) (sorry, no internal pagination) (emphasis added).  There it is again – §360j(e) – used as authority for requiring that medical device labeling include warnings (in this case a boxed warning) about off-label use.  See also “Guidance for Industry and FDA Staff - Class II Special Controls Guidance Document: Ovarian Adnexal Mass Assessment Score Test System,” 2011 WL 1427005, at *19-20 (F.D.A. March 23, 2011) (containing the specific contents of the boxed off-label use warning in question).

Why do we care?  Number one, the FDA’s authority to require warnings and other information pertaining to off-label use demonstrates that off-label use isn’t some sort of unregulated and anarchic black hole.  The FDA still retains its usual authority to require the addition of risk information, subject to its established scientific standards.

Number two, implied impossibility preemption under Levine-Mensing-Bartlett should apply generally to prohibit all plaintiffs from making any demands for warnings pertaining to off-label uses against all prescription medical devices because, for both drugs and devices, such warnings explicitly and repeatedly require FDA pre-approval.  The FDA has always maintained tight control over the information that regulated manufacturers may provide that pertains to off-label uses.  Whether or not we like that as a First Amendment proposition, it’s a fact, and it’s reflected in the FDA’s regulations pertaining to off-label use warnings for both prescription drugs and medical devices.

Number three, in the specific context of PMA medical devices, the FDA’s power to require off-label information in labeling means that a plaintiff’s demand for off-label warnings “different from or in addition to” what the FDA has required (or chosen not to require).  That, in turn, mandates that such demands be expressly preempted under Riegel.

[R]egulations issued under section 520(e) . . .  of the act may impose restrictions on the sale, distribution or use of a device beyond those prescribed in State or local requirements.  If there is a conflict between such restrictions and the State and local requirements, the Federal regulations shall prevail.

Dunlap v. Medtronic, Inc., 47 F. Supp.2d 888, 895 (N.D. Ohio 1999).

Federal preemption is the strongest defense available to manufacturers of prescription drugs and medical devices.  Where available it should be employed to the maximum extent possible.

This blog was originally posted on December 19. Click here to read the original entry. 
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Food labeling class actions continue to plague food manufacturers and retailers, with the Northern District of California being the favored forum for these claims.  Indeed, in The New Lawsuit Ecosystem: Trends, Targets and Players (Oct. 2013), the U.S. Chamber Institute for Legal Reform identified food labeling class actions brought by plaintiffs, public interest groups, and attorneys general as one of the primary emerging liability threats facing American businesses.  One of the favorite allegations of such claims centers on the use of “all natural” or similar words on food labels.  Very often, a plaintiff alleges that a product contains ingredients from genetically modified soybean or corn, so the product allegedly cannot be considered “natural.”  With California’s liberal consumer protection laws, these claims often survive motions to dismiss, with courts reasoning that plaintiffs adequately pled that reasonable consumers will read “all natural” labels and conclude that the product does not contain genetically modified or other allegedly unnatural ingredients.  E.g., Parker v. J.M. Smucker Co., No. C 13-0690 SC (N.D. Cal. Aug. 23, 2013) (denying motion to dismiss claims that vegetable oils were not “all natural”).

Though not from the Northern District of California, another recent federal court decision from that state offers some hope to defendants in these actions.  In Pelayo v. Nestle USA, Inc., No. CV 13-5213-JFW (AJWx) (C.D. Cal. Oct. 25, 2013), the court dismissed an “all natural” labeling action.  That plaintiff alleged that a number of pasta products should not bear the “all natural” label because they contain synthetic xanthan gum and soy lecithin.  Thus, according to that plaintiff, the labels would be reasonably likely to deceive the public under California consumer protection laws.

In dismissing the claims that court seized on an issue that truly affects all of these “all natural” claims. That is, the plaintiff “fail[ed] to offer an objective or plausible definition of the phrase ‘All Natural,’ and the use of the term ‘All Natural’ is not deceptive in context.”  [Slip Op. at 4]  Notions that “natural” means only something existing in nature surely could not apply as any consumer would realize that pasta is a manufactured product; the reasonable consumer does not believe that pasta grows in fields or is ranched from livestock.

The court also rejected that plaintiff’s effort to rely on the definition of “organic” to bolster her claims. Unlike “natural,” the word “organic” has a specific definition in the Code of Federal Regulations. Moreover, the court concluded that “it is implausible that a reasonable consumer would believe ingredients allowed in a product labeled ‘organic,’ such as the Challenged Ingredients, would not be allowed in a product labeled ‘all natural’.” [Slip Op. at 5]

Finally, the court noted that the products bear the “all natural” label on the front and back of the packages, and that the label on the back appears immediately above the list of ingredients. Thus, the ingredient list clarifies any supposed ambiguity regarding the definition of “all natural” by identifying the challenged ingredients.  In such a circumstance, a reasonable consumer would not be misled by “all natural” appearing on the label.

Pelayo highlights a weakness of these “all natural” claims.  That is, there is no widely-recognized definition of that phrase.  It should be impossible to allege or prove that the mythical reasonable consumer will be misled by a phrase that does not have a uniform or even generally-recognized definition.  This is particularly true when ingredient labels identify the product’s contents.  Unfortunately, many defendants in the Northern District of California, in particular, could not obtain dismissal of such “all natural” claims against them.  Thus, those cases must progress to discovery and possibly summary judgment in order to make the points that the Pelayo court raised.  That is, there is no common understanding of the phrase “all natural,” so it is impossible to establish that the phrase misleads reasonable consumers.  Indeed, it is possible that consumers may interpret “all natural” in a manner that favors defendants.  It should be a plaintiff’s burden to prove what “all natural” means to reasonable consumers, likely though statistically significant and reliable consumer survey research.  Going through the discovery process to reach that stage and summary judgment is expensive and a distraction to defendants, of course.  In the interim, however, defendants may use the Pelayo court’s reasoning to attack such “all natural” claims at the motion to dismiss stage.

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Two recent district court decisions denying motions to dismiss in food labeling putative class actions demonstrate how plaintiffs’ counsel will use the presence of genetically modified crops as a basis for consumer fraud claims.  

In Parker v. J.M. Smucker Co., No. C 13-0690 SC (N.D. Cal. Aug. 23, 2013), the plaintiff alleged that four types of Crisco cooking oil were deceptively labeled as “all natural” because they are made with genetically modified crops and are chemically processed.  Parker is pending in the Northern District of California, which has become the favorite forum for food labeling class actions. That plaintiff alleged that the four types of cooking oil could not truthfully be called “all natural” because more than 70% of U.S. corn, more than 90% of U.S. soy, and more than 80% of U.S. canola crops are genetically modified.  That court rejected a number of arguments that the defendant raised in its motion to dismiss.  Most notably here, the defendant’s preemption argument failed because the FDA’s only action with respect to bioengineered foods to date is to refuse to require disclosing that a product includes such genetically modified ingredients.  The court rejected the notion that the plaintiff wants to force companies to label products as containing genetically modified ingredients.  Rather, the plaintiff only contended that products with genetically modified ingredients could not be labeled “all natural” without being misleading.  That theory was not preempted. Furthermore, the plaintiff’s California state law claims under that state’s consumer protection statutes could proceed. The court could not conclude as a matter of law at this stage that reasonable consumers would all understand that packaged, non-organic foods may contain bioengineered ingredients and that the only way to avoid such ingredients is to buy certified organic products.  The court found it plausible that a reasonable consumer would read the “all natural” statement and conclude that such a product does not contain bioengineered or chemically-altered ingredients.  

Interestingly, the Parker court also refused to dismiss the plaintiff’s express warranty claims.  Courts had been dismissing such express warranty claims relating to food products regularly, concluding that the Magnuson-Moss Act (or state law analogs) only applied to defects, and labeling on a package cannot support such claims.  In this instance, however, the court concluded that “all natural” is an affirmative claim about the product’s qualities sufficient to support common law express warranty claims.  

Another recent case is In re Frito-Lay North America, Inc. All Natural Litigation, No. 12-MD-2413 (RRM) (RLM) (E.D.N.Y. Aug. 29, 2013).  One item of note, of course, is that the case is not in the Northern District of California despite that court’s popularity with plaintiffs.  In this case, the plaintiffs alleged that a number of Frito-Lay products were deceptively labeled as “all natural” despite containing genetically modified ingredients.  While the court granted the motion to dismiss Frito-Lay’s parent company (PepsiCo, Inc.), it largely allowed the consumer fraud claims to proceed. The primary jurisdiction doctrine did not apply because the FDA has not formally addressed when food may be labeled as “natural.”  Moreover, there is no indication of when the FDA may define that term or whether its definition would shed any light on whether a reasonable consumer is deceived labeling a product “all natural” when it contains bioengineered ingredients.

Preemption did not apply because any guidance from the FDA was non-binding, and several other courts had recently rejected similar preemption arguments regarding the meaning of “natural.” The court also refused to conclude as a matter of law that a reasonable consumer would not conclude that “all natural” means that the product does not contain any genetically modified ingredients. Interestingly, this court dismissed the warranty claims because the plaintiffs did not allege that they provided pre-suit notice as required by the Uniform Commercial Code.  The court, however, refused to rule as a matter of law that “all natural” labeling could not constitute an express, factual description regarding the products’ qualities.

Because the substantial majority of certain American crops use bioengineering, these types of “all natural” claims likely will gain traction with the plaintiffs’ bar. Thus far, courts have not shown any tendency to dismiss these claims early in the litigation.  Unfortunately, food producers likewise may expect similar claims based on statements of products being “pure,” “nothing artificial,” and the like.  California consumer protection laws will continue to be the basis for a number of such claims because of the minimal standing requirements under those laws.  Absent regulatory action by the FDA or legislation from Congressional (which seems unlikely), these cases seem likely to multiply. Thus, the real battles may move from the motion to dismiss stage to class certification and summary judgment. At some point, these plaintiffs must come forward with admissible evidence that these labels are likely to mislead reasonable consumers.  Similarly, they must provide some methodology for measuring the alleged economic impact of the supposed misrepresentations; on that score, the Supreme Court’s 2013 opinion in Comcast Corp. v. Behrend may prove to be a considerable stumbling block for these plaintiffs seeking class certification in federal court.

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