Snack Bar Class Action Dismissed

An Illinois federal judge recently dismissed a proposed class action alleging the defendant somehow misled consumers about sugar in its snack bars despite the ingredient label.  See Rochelle Ibarrola v. Kind LLC, No. 3:13-cv-50377, 2015 WL 1188498 (N.D. Ill. 3/12/15).

Plaintiff brought a putative class action against a maker of food products, alleging she purchased its Vanilla Blueberry Clusters with Flax Seeds (“Vanilla Blueberry Clusters”)—on two occasions in 2013. Citing the Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”), 815 Ill. Comp. Stat. 505/1 et seq., she alleged that the packaging of Vanilla Blueberry Clusters was deceptive in that it claimed that the product contained “no refined sugars.” Specifically, she asserted that evaporated cane juice and molasses, identified on the products’ ingredient lists, are refined sugars. She proposed both a statewide and nationwide class of individuals who purchased any of defendant's four identified Healthy Grains products.

Defendant moved to dismiss, and the Court agreed that plaintiff had not plausibly alleged that a reasonable consumer would be deceived by the statements in light of the label information (and the express warranty claim was dismissed because she did not notify Kind of the alleged breach of warranty as required by Illinois law.)

To prevail on her ICFA claim, plaintiff had to allege and ultimately prove: (1) a deceptive act or practice by Kind, (2) that the deceptive act or practice occurred in the course of conduct involving trade or commerce, (3) that Kind intended that plaintiff rely on the deception, and (4) that the deception caused her actual damages. Oshana v. Coca–Cola Co., 472 F.3d 506, 513 (7th  Cir. 2006). In addition to these elements, common law fraud requires plaintiffs to allege that the plaintiff actually relied on the contested statement and that the defendant acted with scienter. Thacker v. Menard, Inc., 105 F.3d 382, 386 (7th Cir.1997).

Ibarrola claimed, somewhat obliquely, that she understood “no refined sugars” to mean that the Vanilla Blueberry Clusters contained only “naturally occurring” sugars that had not been refined at all.  But, said the Court, this is not plausible. The Court noted it must view the allegedly misleading statement in light of the information available to plaintiff at the time of her purchase.  Plaintiff stated that she read the entire product label before purchasing the Vanilla Blueberry Clusters. In doing so, she learned that the product contained evaporated cane juice and molasses—sweeteners that she alleged are at least partially refined.  That is, because she admitted reading the entire product label she thus saw that the product contained evaporated cane juice, and must have recognized that at least one of the sweeteners in the Vanilla Blueberry Clusters was derived from sugar cane. Thus, taken at her word, plaintiff alleged that she thought that Vanilla Blueberry Clusters contained sugar cane in its natural state, not having gone through any process to refine it.  But sugar cane in its natural state is a grass that contains jointed stalks resembling bamboo. The stalks are made up of fibrous flesh surrounded by bark!

Given this reality, no reasonable consumer would think—as plaintiff alleged that she did—that the sugar contained in the products was still in its natural, completely unrefined state.  Even though a reasonable consumer may not understand everything that happens to sugar cane before its derivative can be added as an ingredient, a reasonable consumer would know that all sugar cane-derived sweeteners suitable for human consumption must be at least partially refined. Reasonable consumers do not believe that they are eating straight sugar cane in Vanilla Blueberry Clusters or any other food product because sugar cane in its natural, unprocessed state is indigestible. That is, a reasonable consumer would recognize that, at the least, impurities or unwanted material must be removed from sugar cane before it can be used as an ingredient in Vanilla Blueberry Clusters, and thus, that all sugar cane-derived sweeteners require some form of  “refining,” as the dictionary defines the term.

Thus, the Court found that the only reasonable conclusion after reading the entire Vanilla Blueberry Clusters label is that defendant used the word “refined” as a term of art to distinguish only partially refined sugars like evaporated cane juice and molasses from fully refined sugars like table sugar.

 

Courts have dismissed other complaints premised on such logical inconsistencies. E.g., Rooney v. Cumberland Packaging Corp.,  No. 12–CV–0033–H DHB, 2012 WL 1512106, at *4 (S.D.Cal. Apr. 16, 2012). See also Kane v. Chobani, Inc., No. 12–CV–02425–LHK, 2013 WL 5289253, at *6 (N.D.Cal. Sept. 19, 2013).

Here, because plaintiff already had an opportunity to amend, the dismissal was with prejudice.

 

Class Action Rejected Per Primary Jurisdiction Defense

A California federal court recently rejected a putative class action alleging meal replacement bars sold in General Nutrition Centers Inc. stores somehow defrauded customers into thinking they were healthy because they were labeled with the term “zero impact.”  See Gabe Watkins v. Vital Pharmaceuticals, et al., No. 2:12-cv-09374 (C.D. Cal. 2013).  Readers may be interested in the discussion of primary jurisdiction.

On September 25, 2012, Plaintiff filed a Class Action Complaint in the Superior Court of California
for Los Angeles County. Plaintiff alleged that Defendants falsely labeled the Bars in violation of the Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200, et seq., and the Consumers Legal Remedies Act ("CLRA"), Cal. Civ. Code § 1750, et seq.  Defendants removed the action to federal court, asserting federal subject matter jurisdiction in reliance on the Class Action Fairness Act, 28 U.S.C. § 1332(d)(2).

Plaintiff asserted that while Vital and GNC marketed and advertised the Bars as 'ZERO IMPACT,' the Bars have an impact on consumers' carbohydrate, sugar and overall caloric intake, and to claim otherwise was "false and misleading."  However, the back of the wrapper features nutritional facts, an ingredient list, and a marketing statement, which notes that the low Dextrose Equivalent sugars contained in the Bars have less impact on blood sugar and glycemic index than most whole grain carbohydrates.  Plaintiff responded that the location and type size of the nutritional information and marketing statement allegedly made it too difficult to see and read.

Defendant moved to dismiss, arguing that the court should defer the question of whether the "ZERO IMPACT" label is misleading, to the Food and Drug Administration under the doctrine of primary jurisdiction.  Primary jurisdiction is a doctrine specifically applicable to claims properly cognizable in court that contain some issue within the special competence of an administrative agency.  Reiter v. Cooper, 507 U.S. 258, 268 (1993). While it is not to intended to secure expert advice for the courts from regulatory agencies every time a court is presented with an issue conceivably within the agency's ambit, it is a doctrine used by the courts to allocate initial decision-making responsibility between agencies and courts where such jurisdictional overlaps and potential for conflicts exist.  Syntek Semiconductor Co., Ltd. v. Microchip Tech. Inc., 307 F.3d 775, 780 (9th Cir. 2002). Typically, there are four factors present in cases where the doctrine properly is invoked: (1) the need to resolve an issue that (2) has been placed within the jurisdiction of an administrative body having regulatory authority (3) pursuant to a statute that subjects an industry or activity to a comprehensive regulatory scheme that (4) requires expertise or uniformity in administration. See United States v. Gen. Dynamics Corp., 828 F.2d 1356, 1362 (9th Cir. 1987). The doctrine is often most applicable where a claim requires resolution of an issue of first impression or of a particularly complicated issue that Congress has committed to a regulatory agency.

Here, the court concluded that the relevant factors weighed in favor of dismissing plaintiff's claims in deference to the FDA's primary jurisdiction.

Defendants contended that the FDA has primary jurisdiction over how a manufacturer may name
and label its food products and that the resolution of plaintiff's UCL and CLRA claims would clearly invade the FDA's primary jurisdiction. Indeed, Congress has granted the FDA regulatory authority over false and misleading food labeling as part of the Food, Drug, and Cosmetic Act. The primary jurisdiction doctrine was applicable in this case because the FDA has yet to consider the nutritional import of the claim "ZERO IMPACT" or in what context the claim might possibly mislead consumers about a product's nutritional content.

Plaintiff's claims centered on the argument that the nature of the marketing claim "ZERO IMPACT," combined with its location on the wrapper and larger type size, somehow created the impression that the Bars have no dietary impact at all.  But could not direct the court to any FDA rule, regulation, or guidance document discussing how the claim "ZERO IMPACT" or even the word "impact" can or should be used to describe a food product's nutritional content. Nor is there any evidence of the FDA bringing an enforcement action against anyone regarding the "ZERO IMPACT" claim or the nutrient content on its label.  Without any guidance about the context in which the FDA would find the claim "ZERO IMPACT" to be permissible, any determination on whether the term is misleading risked undermining, through private litigation, the FDA's considered judgments.

The FDA has issued some regulations with regard to the word "zero," but these are designed to
make sure that foods with claims like "zero calorie," "zero sodium," and "zero fat" contain the type
and amount of nutrients that a reasonable consumer would expect. See 21 C.F.R. §§ 101.60-101.62. Without more, however, there is no reasoned way for a court to determine whether the FDA regulations associated with labeling items as "zero calorie" and "zero fat" could encompass a claim like "ZERO IMPACT."   Calories, sugar, and fat are specific nutritional elements, but "impact" may refer to the effect those elements have on the human body.

In the absence of any FDA rules or regulations (or even informal policy statements) regarding the
use of the word 'impact' on food labels, the court declined to make any independent determination on whether defendant's use was false or misleading.  The court  concluded it lacked the FDA's expertise in guarding against deception in the context of food labeling.  See Pom Wonderful, 679 F.3d at 1178, and so it deferred this issue to the FDA to consider administrative action regarding the use of the "ZERO IMPACT" claim.

 

Chew on This: Consumer Fraud Claim on Snack Bars Preempted

The Seventh Circuit ruled earlier this month that federal food labeling law expressly preempts state law claims seeking certain additional health-related disclosures on chewy bars. Turek v. General Mills Inc., No. 10-3267 (7th Cir. 10/17/11).

The bars have been around since at least the early 1980's, but have grown into a nearly $2 billion segment of the food industry.  Consumers love their portability, and relatively low calorie count.

Plaintiffs brought a diversity class action suit under the Illinois Consumer Fraud and Deceptive Business Practices Act, and the Illinois Uniform Deceptive Trade Practices Act, alleging that the label of certain "chewy bars" was misleading regarding fiber content.  Specifically, the complaint alleged that the principal fiber, by weight, in the bars was inulin extracted from chicory root. The complaint describes inulin so extracted as a processed, "non-natural” fiber which was not as beneficial to consumer health as other fiber.

Those state law claims ran smack into a provision of the Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 343-1(a)(5), added by the Nutrition Labeling and Education Act of 1990, which forbids states to impose “any requirement respecting any claim of the type described in section 343(r)(1)
[of the Food, Drug, and Cosmetic Act] . . . made in the label or labeling of food that is not identical to the requirement of section 343(r).”  A state thus can impose the identical requirement or requirements, and by doing so be enabled, because of the narrow scope of the preemption provision in the Nutrition Labeling and Education Act, to enforce a violation of the Act as a violation of state law. See also In re Pepsico, Inc. Bottled Water Marketing and Sales Practices Litigation, 588 F. Supp. 2d 527, 532 (S.D.N.Y. 2008); “Beverages: Bottled Water,” 60 Fed. Reg. 57076, 57120 (Final Rule, Nov. 13, 1995). This is important because the Food, Drug, and Cosmetic Act does not create a private right of action. Medtronic, Inc. v. Lohr, 518 U.S. 470, 487 (1996).

The question thus became what requirements the federal law imposes on the labeling of dietary fiber. Section 343(q)(1) of the Act contains a requirement that the “label or labeling” of food products intended for human consumption state “the amount of . . . dietary fiber . . . contained in each serving size or other unit of measure.” Other requirements for labeling claims relating to dietary fiber are set forth in implementing regulations.  

The labeling of the products challenged by the plaintiff was compliant with these regulations relating to health claims for dietary fiber. See, e.g., 21 C.F.R. § 101.76. All the FDA’s requirements relating to labeling dietary fiber are requirements to which any labeling disclosures required by a state must be identical.  But the disclaimers that the plaintiff wants added to the labeling of the defendants’ inulin-containing chewy bars were not identical to the labeling requirements imposed on such products by federal law, and so they were barred, held the court of appeals. The information required by federal law does not include disclosing that the fiber in the product includes inulin or that a product containing inulin allegedly produces fewer health benefits than a product that contains only product that contains only “natural” fiber, for example. 

Even if the disclaimers that the plaintiff wants added would be "consistent" with the requirements imposed, importantly, consistency is not the test. Identity is, said the court.

The Seventh Circuit thus affirmed dismissal of the case. But clarified, procedurally, that when a state law claim is expressly preempted under section 403A of the Federal Food, Drug, and Cosmetic Act,” a dismissal on the merits is the proper outcome, with prejudice like other merits judgments, not dismissal for want of federal jurisdiction, as the district court had ordered.

This is a victory for consumers when one considers why Congress did not want to allow states to impose disclosure requirements of their own on packaged food products, most of which are sold nationwide. Manufacturers might have to print 50 different labels, driving consumers who buy the food products crazy. A granola bar you buy in California ought to look just like the one you buy in Maine.

 

Competing Model of Plaintiff Class Action Bar Forthcoming

Readers of MassTortDefense are mostly from the defense bar, and are always thinking about what the other side is thinking about.

Visiting Professor Ratner of Harvard Law School is trying to give us a new view of plaintiff class action attorneys.  Since he practiced with Lieff Cabraser Heimann & Bernstein, readers can soon decide for themselves whether his view is descriptive or wishful thinking. See Ratner, Morris, A New Model of Plaintiffs' Class Action Attorneys (2011). Review of Litigation, Forthcoming.

According to the author, this article offers a new model for conceptualizing plaintiffs’ class action attorneys, and thus for understanding principal-agent problems in class action litigation. It responds to the work of Professor John C. Coffee, Jr., who, in a series of influential articles, demonstrated that principal-agent problems may be acute in class action litigation because class members lack the information or financial incentive to monitor class counsel; class counsel is thus free to pursue his own interests at the expense of the class members. But what are those interests, and how do they diverge from the class members’ interests? Professor Coffee provided one answer to this sub-set of questions, presenting an account of class counsel and the precise parameters of his disloyalty corresponding with three descriptive assertions: that class counsel is either a solo practitioner or in a small firm; that he is predominantly interested in maximizing his law firm profit; and he capably pursues his fee-maximizing goal by investing his time in cases based on confident predictions about expected fees.

In this article, the author offers a competing conception of the dominant class action attorneys and firms; he argues that the leading firms today are relatively large and internally complex; law firm structural complexity creates diverse incentives other than maximization of law firm profit; and class counsel invest time in cases for complex reasons other than the effect on expected fees, particularly because fees are notoriously difficult to predict. Modeling class counsel to recognize this complexity has three virtues, he claims: it better reflects the actual characteristics of the most significant class action attorneys, and hence is a more accurate descriptive tool; as such, it enables a more precise understanding of the extent and nature of agency or loyalty problems; and thus, finally, it provides a more solid basis for needed reforms. In particular, this new model, the author asserts, sheds insight on the importance of direct versus incentive-based regulation to manage agency costs in class actions. In light of the diverse incentives this new model reveals, direct regulation of outcomes by trial courts using enhanced final approval standards should be a central part of any package of reforms to manage agency costs in class litigation, argues the author.

We are looking forward to seeing the arguments.