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Class Actions & Derivative Suits

Confusion in Court over "All Natural" Claims

By Dawn Goulet – April 30, 2012


The American consumer faces a dilemma in the grocery aisle. On the one hand, we’ve been taught that foods high in sugar, fat, and cholesterol are bad for us. In the past few decades, a whole new industry was developed to market reduced-fat and artificially sweetened diet foods. Consumers could literally have their cake and eat it too. In recent years, however, processed foods, including many popular diet foods, have been criticized for containing chemicals, artificial colors, preservatives, flavor enhancers, and other indescribable, unpronounceable, and sometimes unimaginable ingredients. In a growing trend, consumers have begun to seriously question whether processed foods are good for them.


The result? Anyone walking the aisles of a grocery store today can see that “all natural” products are big business. Advertisers steer consumers toward foods advertised as natural, organic, and simple, feeding on consumers’ growing fear that they do not really know what they are eating or feeding to their families. But are these products really better? In the 2002 bestseller Fast Food Nation, Eric Schlosser, author and investigative journalist, admonished readers, saying “If they have to put the word ‘natural’ on a box to convince you, it probably isn’t.” Fuel has recently been added to the controversy by the latest war between big sugar and the artificial-sweetener industry and a slew of recent class-action lawsuits.


The Sugar Wars
Last year, sugar distributors sued the major corn processors and their trade group, the Corn Refiners Association (CRA), in the Central District of California over advertisements equating high-fructose corn syrup (HFCS) with real sugar. Western Sugar Cooperative v. Archer Daniels Midland Co., Case No. 11-cv-3473 (C.D. Cal.). The lawsuit coincided with the CRA’s petition to the Food and Drug Administration (FDA), asking it to allow HFCS to be called “corn sugar,” an apparent attempt to rebrand a product that has recently been vilified and blamed for the obesity epidemic in America. Recent advertisements by the corn industry depict small children expressing concern about HFCS and their parents assuring them, and the audience, that medical and nutrition experts assure us corn syrup is really no different from cane sugar. Advertisements typically include slogans like “sugar is sugar,” and “your body can’t tell the difference.” In a July 12, 2011, letter, the FDA asked the corn industry to stop using the phrase “corn sugar” to refer to HFCS while it decides whether to give the term regulatory approval.


The defendants moved to dismiss the case, arguing that consumers have not been deceived, that the issue should be decided by the FDA, and that the advertisements are protected speech forming part of a national conversation about the merits of HFCS and sugar. On October 21, 2011, the court dismissed claims against the individual corn processors without prejudice but permitted Lanham Act claims against the CRA to go forward. It rejected the CRA’s argument that the statements it made were not commercial speech governed by the Lanham Act and that they were instead part of an “education campaign.” It also found the plaintiffs had adequately pled that the CRA’s statements about HFCS—in particular, the statements that HFCS is “natural,” that “sugar is sugar,” and that HFCS is “corn sugar”—were false. Finally, the court found that the primary-jurisdiction doctrine did not counsel in favor of staying the case, pending the FDA’s ruling on the CRA’s citizen petition because that determination would not dispose of all of the plaintiffs’ claims.


Early this year, the plaintiffs amended their complaint to again attempt to assert Lanham Act claims against the individual corn refiners, this time arguing that, as members of the CRA, the companies are agents of the organization who should be held responsible for its actions. The defendants again moved to dismiss. That motion is now pending before the court.


The corn-syrup lawsuit is reminiscent of a previous chapter in the sugar wars involving the artificial sweetener, Splenda (sucralose). In 2004, the Sugar Association sued McNeil Nutritionals, maker of Splenda, alleging the product unfairly competed with sugar based on misleading advertisements representing to the public that Splenda was a natural food product. The lawsuit alleged that slogans like “tastes like sugar because it’s made from sugar,” were deceptive because “[s]ucrolose is chemically achieved through a multi-step patented process that dramatically alters the molecular structure of sucrose.” The Sugar Assoc., Inc. v. McNeil-PPC, Inc., Case No. 04-cv-10077 (C.D. Cal.). The lawsuit settled for an undisclosed amount in November 2008. A separate lawsuit brought by Merisant, the maker of Equal (aspartame), over the same advertising claims was tried for one month to a jury and settled for an undisclosed amount just before a verdict was announced. Merisant v. McNeil Nutritionals, LLC, Case No. 04-cv-05504 (E.D. Pa.).


Following the filing of these cases by Splenda’s competitors, more than a dozen class actions were filed by consumers in states across the country. McNeil aggressively and successfully opposed class certification by demonstrating not only that the named plaintiffs bought Splenda for reasons other than because they believed it was “natural” or believed it contained sugar, but also that survey evidence showed that class members were not deceived by the “tastes like sugar because it’s made from sugar” campaign.


A Silent FDA
Just as it has been asked by the corn industry to define the phrase “corn sugar” over the years, the FDA has been asked to adopt formal rulemaking to define the word “natural.” So far, it has declined to do so. In 1991, the agency solicited comments on a potential rule regarding the definition of the word “natural.” Noting that “use of the term ‘natural’ on [a] food label is of considerable interest to consumers and industry,” the agency nevertheless declined to adopt a formal definition:


After reviewing and considering the comments, the agency continues to believe that if the term “natural” is adequately defined, the ambiguity surrounding use of this term that results in misleading claims could be abated. However, as the comments reflect, there are many facets to this issue that the agency will have to carefully consider if it undertakes a rulemaking to define the term “natural.” Because of resource limitations and other agency priorities, FDA is not undertaking rulemaking to establish a definition for “natural” at this time.


58 F.R. 2302-01 (1993).


Instead, the FDA stood by its existing policy, which states that it considers “natural” to mean “merely that nothing artificial or synthetic (including colors regardless of source) is included, or has been added to, the product that would not normally be there.” 56 F.R. 60421-01 (1991). The policy, however, carries only the weight of an advisory opinion, and it does not establish a legal requirement. 21 C.F.R. § 10.85(d), (e), (j). It merely creates a safe harbor for manufacturers from FDA enforcement; the FDA will not recommend legal action against a company or product that complies with the policy. On its website, www.fda.gov, the FDA provides consumers the following less-than-helpful explanation:


What is the meaning of “natural” on the label of food?


From a food science perspective, it is difficult to define a food product that is “natural” because the food has probably been processed and is no longer the product of the earth. That said, the FDA has not developed a definition for use of the term natural or its derivatives. However, the agency has not objected to the use of the term if the food does not contain added color, artificial flavors, or synthetic substances.


In 2007, the FDA received petitions requesting that it clearly define the term “natural”—one submitted by the Sugar Association and the other by the food manufacturer Sara Lee. The online publication Food Navigator reported that Geraldine June from the FDA’s Food Labeling and Standards Department stated in an interview that the issue was not a priority for the FDA because there was not enough evidence that consumers were being misled, but “[i]f there was, then [the FDA] would definitely raise it as a priority.” Ms. June told Food Navigator, “The bottom line is we’d have to have consumer research that shows overwhelmingly that people are being misled.” Lorraine Heller, ‘Natural’ will remain undefined, says FDA, Food Navigator (Jan. 4, 2008).


In 2010, in a lawsuit against Snapple in the District of New Jersey, the court certified to the FDA for an administrative determination the question whether HFCS qualifies as a “natural” ingredient. Coyle v. Hornell Brewing Co., Case No. 08-cv-2797 (D. N.J.). On September 16, 2010, the FDA responded by letter and declined to provide the court with the requested guidance. Stating that it would take two to three years to engage in a transparent proceeding to elicit the proper public participation, the FDA again cited its limited resources and more pressing food-safety concerns. It pointed out that “[c]onsumers currently receive some protection in the absence of a definition of ‘natural’ because the Federal Food, Drug, and Cosmetic Act and FDA’s implementing regulations require that all ingredients used in a food be declared on the food’s label.”


The Recent Spate of “All Natural” Lawsuits
The uncertainty over the meaning of the phrase has not stopped a wave of class actions from being filed against food and beverage manufacturers, claiming that it is misleading for them to advertise their products as “all natural” because consumers are in fact being misled. A sampling of some of the most publicized cases demonstrates that they generally fall into four categories: products containing HFCS, products containing genetically modified organisms (GMOs), products containing artificial preservatives, and products processed with chemicals or containing other unnatural ingredients. Each of the lawsuits alleges that defendants are able to charge a premium for their products because the “all natural” designation falsely leads consumers to believe the products do not contain these substances.


AriZona Beverages: HFCS
In 2007, the first of several class actions was filed against the makers of AriZona beverages for advertising its products as “100% Natural” when they contained HFCS. Holk v. Snapple Beverage Corp., Case No. 07-cv-03018 (D. N.J.). On behalf of a nationwide class, the plaintiffs asserted causes of action for violation of New Jersey’s consumer-fraud act, breach of express and implied warranty, and unjust enrichment. As discussed above, the FDA was asked to weigh in on the meaning of the word “natural” in one of these cases, but declined to do so. Shortly after, the plaintiffs voluntarily dismissed the case.


Snapple: HFCS
On October 10, 2007, a class-action lawsuit was filed against Snapple Beverage Corp., alleging the company advertised its products as “all natural” when they contained HFCS. Weiner v. Snapple Beverage Corp., Case No. 07-cv-08742 (S.D.N.Y.). Describing HFCS as “a highly processed sugar substitute that does not exist in nature,” the complaint goes into some detail regarding the many steps plaintiff alleges are required to chemically produce HFCS from cornstarch. On behalf of a class of New York purchasers, the complaint asserts claims for violations of New York’s deceptive trade practices act, unjust enrichment, and breach of express and implied warranties.


On August 3, 2010, the Southern District of New York denied the plaintiffs’ motion for class certification, finding they had failed to satisfy Rule 23(b)’s predominance requirement. On January 21, 2011, the court then granted Snapple’s motion for summary judgment, finding the plaintiffs had failed to show that they had paid a premium for the “all natural” label on Snapple beverages. The court pointed out that the plaintiffs had no records of their purchases and offered no evidence of the prices charged by competing or comparable beverages that did not contain the alleged mislabeling. Noting that it would be a difficult task to show injury because the prices of beverages in the retail market vary widely and are affected by the nature and location of the outlet and the availability of discounts, the court found that it was nonetheless the plaintiffs’ burden to prove they had paid more because of the “all natural” representation.


Healthy Choice: HFCS
A class-action lawsuit was filed in the Northern District of California on September 2, 2008, alleging that, as part of a scheme to make its products more attractive to consumers, to boost sales, and to ultimately increase profits, ConAgra foods advertised its Healthy Choice pasta sauces as “Deliciously All Natural” and “a 100% Natural . . . sauce you can feel good about serving,” even though the products contain HFCS. Lockwood v. ConAgra Foods, Inc., Case No. 08-cv-04151 (N.D. Cal.). The complaint asserted claims for unlawful and deceptive business acts and practices, false advertising, injunctive relief, and restitution on behalf of a class of California consumers.


On February 3, 2009, ConAgra’s motion to dismiss, in which it argued that the plaintiff’s claims were preempted by the Nutrition Labeling and Education Act (NLEA) and comprehensive FDA regulations, was denied. Noting that, under the NLEA, states may only impose labeling requirements that are identical to those imposed by the FDCA, the court found that the plaintiff’s claims were not preempted by provisions in the FDCA providing that food is misbranded if it contains artificial flavoring, artificial coloring, or chemical preservative unless it bears a label disclosing these contents or is an imitation of another food but does not identify itself as such. The court decided that the plaintiff’s allegations did not fall into either one of these categories. The court also found that the plaintiff’s claims were not impliedly preempted because Congress did not intend the FDA to completely occupy the field of food and beverage labeling, and the FDA’s own policy as to the word “natural” suggested an intent not to occupy the field of food labeling. The court noted that, “[a]lthough the FDA acknowledges that consumers are being misled by the use of the term ‘natural,’ it has declined to adopt any regulations governing this term,” and that “[t]his inaction is consistent with an intent not to occupy the field.”


On September 4, 2009, the parties informed the court that they had reached an undisclosed settlement.


Kix Cereal: GMOs
On October 28, 2011, a class-action lawsuit was filed against General Mills in California state court, alleging the company engaged in a widespread marketing campaign to mislead consumers about the nature of the ingredients in its Kix cereals. Lewis v. General Mills, Inc., Case No. BC472451 (Cal. Super. Ct., Los Angeles County). The lawsuit alleges that General Mills is able to command a premium for its cereals by deceiving customers into believing they are made with “All Natural Corn,” when the corn used in the cereals is actually derived from genetically modified plants. The complaint alleges that, in a September 2010 press release issued to introduce the “new look” of Original Kix and Honey Kix cereals, General Mills made the following claims: “Now with only eight ingredients—each of them all-natural—the ‘Kid-Tested Mother-Approved’ cereal has no artificial colors, no artificial flavors, or no artificial preservatives.” The complaint argues that products containing GMOs are “unnatural by definition,” and cites a 2010 poll by the Hartman Group finding that most consumers erroneously believe the term “natural” implies the absence of GMOs. On behalf of a nationwide class, the plaintiffs are asserting claims for unlawful, unfair, and fraudulent business practices; deceptive advertising; and breach of express and implied warranties under California law.


Frito-Lay Chips: GMOs
On January 27, 2012, a class-action lawsuit was filed against Frito-Lay and Pepsico in the Eastern District of New York. Shake v. Frito-Lay North America, Inc., Case No. 12-cv-00408 (E.D.N.Y.). Consolidated with two related cases, the suit claims that the companies’ Tostitos and SunChips products were not “made with ALL NATURAL ingredients” because the corn and oils used to make them were made from genetically modified plants. On behalf of a nationwide class, the plaintiffs are asserting causes of action for violations of New York’s consumer-fraud and false-advertising laws and breach of express warranty.


SkinnyGirl Margarita: Artificial Preservatives
In September and October of 2011, eight class-action lawsuits were filed in federal courts in California, Florida, New Jersey, New York, and Illinois against Beam Global Spirits & Wine, Inc., the makers of SkinnyGirl Margarita beverages, asserting claims for consumer fraud, false advertising, and breach of express warranty. In re: Skinnygirl Margarita Consumer Litig., MDL 2306, Response in Opp. to Mot. for Transfer Pursuant to 28 U.S.C. § 1407 [ECF No. 10], Oct. 13, 2011 (listing individual cases). The cases allege that, since 2009, SkinnyGirl Margarita has been packaged, marketed, and advertised as being “all natural” and containing “no preservatives,” even though the product contains a synthetic preservative called sodium benzoate that is found in many diet sodas. The plaintiffs allege that, in the wake of Whole Foods Market’s decision to stop selling the product, Beam released a statement admitting that its beverages contain sodium benzoate, but continues to sell them as “all natural.”


Ben & Jerry’s Ice Cream: Ingredients Processed with Chemicals
A class-action lawsuit against Ben & Jerry’s Homemade, Inc., was filed in the Northern District of California on September 29, 2010, on behalf of a nationwide class and a California subclass of consumers who purchased Ben & Jerry’s “all natural” ice cream products containing alkalized cocoa. Astiana v. Ben & Jerry’s Homemade, Inc., Case No. 10-cv-4387 (N.D. Cal.). The complaint asserts claims for unlawful, unfair, and fraudulent business practices; deceptive advertising; and unjust enrichment under California law. According to the complaint, alkalized cocoa is “a non-natural processed ingredient” containing “potassium carbonate, a man made, synthetic ingredient.” Manufacturers process cocoa with alkali to neutralize its acidity, but the complaint alleges that this process destroys the flavonols that are believed to give dark chocolate its beneficial antioxidant, anti-inflammatory, and antiviral properties. The plaintiffs alleged that Ben & Jerry’s use of alkalization was incompatible with the phrase “all natural.”


On May 26, 2011, the court denied Ben & Jerry’s motion to dismiss. Noting that the argument regarding the implausibility of the plaintiffs’ claim that they were deceived was “somewhat persuasive,” the court nevertheless determined that this issue involved a question of fact beyond the scope of a motion to dismiss. It went on to find the named plaintiffs had pleaded their allegations of fraud with the requisite particularity and had standing to sue because, “[i]f the plaintiffs did indeed purchase the ice cream based on the representation that it was ‘all natural’ and if that representation proves to be false, then they arguably have suffered an injury in fact.” Finding that the FDA has only issued an advisory opinion on the meaning of the word “natural,” the court furthermore rejected the argument that the plaintiffs’ claims were preempted because they sought to impose disclosure requirements that were different from and not identical to FDA regulations. Finally, the court rejected a motion to strike the class allegations, finding that questions regarding whether the proposed class was ascertainable and whether a class action would be a superior mechanism for resolving the dispute should be addressed in connection with a class-certification motion.


In early 2012, a joint settlement was reached in this case and in a similar case against Breyers. The settlement requires Ben & Jerry’s and Breyers, respectively, to establish $5 million and $2.5 million restitution funds from which class members who certify that they purchased the affected products will receive $2.00 per package, for up to 10 packages, with no proof of purchase required. Under the settlement, the defendants agree to discontinue use of the term “all natural” on their ice cream, yogurt, and sorbet products containing alkalized cocoa. A preliminary approval hearing was scheduled to be held in late March.


Fiber One: Ingredients Processed with Chemicals
On November 9, 2009, a class-action complaint was filed against General Mills and Kellogg Co., manufacturers of the Fiber One line of products, in the Northern District of Illinois. Turek v. General Mills, Inc., Case No. 09-cv-7038 (N.D. Ill.). Brought on behalf of a nationwide class for violations of Illinois’s consumer-fraud law, the lawsuit alleges that the defendants market a number of food products as containing high levels of dietary fiber, including “Fiber One Chewy Bars,” which are said to provide “35% Daily Value of Fiber,” and “Fiber One NonFat Yogurt,” which is advertised as containing 5 grams of fiber per serving. The complaint alleges that the Fiber One products do not contain fiber that is “intrinsic and intact (found naturally) in plants,” however, but rather a substance called inulin, a type of fiber that has been “isolated, concentrated and extracted chemically from various plant sources.” According to the plaintiff, “this non-natural fiber has not been shown by current evidence to possess all of the health benefits of natural fiber.”


On September 1, 2010, the district court granted the defendants’ motion to dismiss, finding that the plaintiff’s claims were preempted by the NLEA. On October 17, 2011, the Seventh Circuit affirmed, altering the judgment to dismissal with prejudice because it found the plaintiff had not properly described or pursued the lawsuit as a class action. Turek v. General Mills, Inc., 662 F.3d 423 (7th Cir. 2011). Because the FDA already had a specific regulation requiring food-product labels to state the amount of dietary fiber in each serving, and because the advertisements of which the plaintiff complained complied with that regulation, the Seventh Circuit found the plaintiff was attempting to enforce a state requirement that was not identical to the federal requirement. Notably, the court stated that, even if the additional disclosures were consistent with FDA regulations, that was not the test. The requirements had to be identical unless the state sought and obtained a specific exemption from the FDA. The court reasoned, “[i]t is easy to see why Congress would 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 food products in more than one state crazy.”


Kellogs/Kashi Cereals: Unnatural Substances
In 2011, a handful of class actions against Kashi Co. and Kellogg Co. were filed and consolidated in the Southern District of California. Astiana v. Kashi Co., Case No. 11-cv-1967 (S.D. Cal.). The consolidated complaint alleges that Kashi and Kellog cultivated a wholesome and healthful image by promoting their products as “all natural” or containing “nothing artificial,” when, in reality, the products contained a wide range of substances like ascorbic acid, calcium pantothenate, calcium phosphates, potassium carbonate, pyridoxine hydrochloride, sodium acid pyrophosphate, sodium phosphates, tocopherols, and/or xanthum gum. On behalf of separate, nationwide “all natural” and “nothing artificial” classes, the plaintiffs are asserting claims for violation of the Magnuson Moss Warranty Act, as well as false advertising; unlawful, unfair, and fraudulent business practices; and common-law fraud under California law.


Bear Naked: Unnatural Substances
On September 21, 2011, a class action was filed in the Northern District of California against Bear Naked, Inc., alleging that the company’s products labeled “100% Pure & Natural” actually contain ingredients recognized as synthetic by federal regulators, including potassium carbonate, glycerin, and lecithin. Thurston v. Bear Naked, Inc., Case No. 11-cv-4678 (N.D. Cal.). On behalf of a nationwide class, the plaintiffs are asserting causes of action for common-law fraud; unfair, unlawful, and deceptive business practices; false advertising; and unjust enrichment under California law.


SoBe Beverages: Unnatural Substances
On February 21, 2012, a class action was filed against South Beach Beverage Co. and Pepsico in the Central District of California. Hairston v. South Beach Beverage Co., Case No. 12-cv-1429 (C.D. Cal.). The complaint alleges that the companies market their SoBe beverages as “all natural” when they do not contain juice from any of the fruits described in their names and contain substances created by chemical processing, including ascorbic acid, cyanocobalamin, calcium pantothenate, niacinamide, and pyridoxine hydrochloride. The case asserts, on behalf of a California class, causes of action for false advertising and unlawful, unfair, and deceptive trade practices under California law.


This wave of “all natural” litigation is still in its early stages, and the varied treatment these lawsuits have received in courts across the country makes it difficult for litigants to predict their chances of success in an “all natural” case. One distinction may prove important, however. Cases where the manufacturer’s representations are governed by specific FDA regulations controlling the content of food labeling, like Turek v. General Mills, are less likely to withstand preemption arguments than cases like Lockwood v. ConAgra Foods that focus solely on claims that a product is “all natural,” a designation the FDA has made clear it has no intention of defining with any degree of certainty.


Don’t Expect Any MDLs
It is also interesting to note that, although multiple nationwide class actions were filed in a number of these cases, MDL treatment has generally been denied where it has been sought. The problem seems to be that the cases are just too straightforward. In the SkinnyGirl Margarita case, for example, the Judicial Panel on Multidistrict Litigation denied a motion to transfer pursuant to 28 U.S.C. § 1407, finding that, because “the central allegation that Skinnygirl Margarita beverage was marketed as being all natural despite some level of sodium benzoate appears to be undisputed,” it was unclear how pretrial proceedings would benefit from centralization. In re: SkinnyGirl Margarita Beverage Marketing and Sales Practices Litig., MDL No. 2306, ECF 61 (J.P.M.L. Dec. 14, 2011). Similarly, in the AriZona beverages case, the panel found that the factual questions surrounding whether the defendants deceptively marketed their beverage products as being all natural when those beverages contain HFCS “did not appear to be sufficiently complex or numerous to warrant centralization.” In re: AriZona Beverage Co. Products Mktg. and Sales Practices Litig., 609 F. Supp. 2d 1369 (J.P.M.L. 2009).


Pointless Lawsuits or Important Catalysts for Consumer Protection?
Although it may be too early to pass judgment, so far the wave of “all natural” litigation has not been a particularly productive one for consumer plaintiffs, and it has resulted in only a handful of modest settlements. But is it fair to say that such lawsuits are pointless? It is possible, although it seems unlikely, that the evidence plaintiffs in these cases are able to marshal will convince the FDA that consumers are indeed being deceived and more concrete regulatory guidance is needed. At the very least, the sheer number of these lawsuits that continue to be filed in 2012 and the media attention they receive may serve to educate consumers who think they know what “all natural” means.


Moreover, although plaintiffs and their lawyers may not be seeing the results they would like in the courtroom, consumers are seeing changes in the grocery aisle as a result of these lawsuits. Beginning in 2009, for instance, Snapple began replacing HFCS with sugar in all of its products labeled as “All Natural.” Similarly, even before a settlement was reached in litigation against it, Ben and Jerry’s agreed to phase out the phrase “all natural” from any of its ice creams or yogurts containing processed contents. One thing is certain. There will be many more of these cases in 2012.


Keywords: litigation, class actions, derivative suits, health, food labeling, class certification, Food and Drug Administration


Dawn Goulet is an associate at Wexler Wallace LLP in Chicago, Illinois.


 
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