Several past Legal Pulse posts have discussed food labeling class action suits against yogurt makers, including this one on a case against Clover-Stornetta Farms for its allegedly misleading use of the term “evaporated cane sugar.” That suit is currently pending in the
Food Court Northern District of California.
Another yogurt-related class action suit, this one claiming that the use of milk protein concentrate (MPC) rendered Activa yogurt misbranded, recently reached a welcome end in the Southern District of New York (Conroy v. The Dannon Company, Inc.).
Conroy alleged injury under a number of state common law theories as well as provisions of New York General Business Law. None of those theories or laws are referenced beyond the opinion’s first page; instead, Judge Vincent Briccetti devoted his analysis entirely to whether MPC is an allowable “other optional ingredient” under Food and Drug Administration (FDA) standards for “yogurt.” If it wasn’t, Conroy’s claims would no doubt have proceeded.
Had one started reading in the middle of the opinion, one would fairly think the complaining entity was FDA, not a random yogurt consumer. Judge Briccetti found that FDA’s views on yogurt were that MPC was permitted as an “other optional ingredient.” FDA’s views, Judge Briccetti wrote, were contained in “a FDA-issued memorandum from the Milk Safety Branch to all Regional Food and Drug Directors.” The document memorialized an answer given by an FDA employee at a Regional Milk Seminar to a question specifically on MPC.
A memo restating the answer to a question at an obscure seminar in 2004 circulated among regional FDA directors — not exactly our idea of good federal rulemaking practice, but enough, it seems to get a class action suit dismissed. That is what Judge Briccetti ultimately did do: grant Dannon’s motion to dismiss as well as its request that the plaintiff be prohibited from amending her complaint.
In our ongoing discussion of and commentary on class actions alleging consumer fraud in food labeling, we’ve assessed numerous cases where use of “natural” or “all natural” allegedly rendered the labeling false or misleading (our latest here and here). These crusading lawyers have rushed into the void left by the Food and Drug Administration (FDA), which has refused to issue a formal definition of “natural” for use on food labels.
Defendants in such cases have routinely argued that FDA policy statements on the meaning of natural should preempt state law-based consumer protection claims, or that courts should defer to the federal agency under the prudential “primary jurisdiction” doctrine. The preemption arguments have been unsuccessful, but some judges have put class action suits on hold and urged FDA action. Such action has not been forthcoming.
Judge Hamilton of the Northern District of California addressed these issues on May 10 in Janney v. General Mills. The suit involves General Mills’s Nature Valley® line of products and claims that certain sweeteners in those products are not “natural.” The defendants sought dismissal based on the primary jurisdiction doctrine. They pointed to a November 2012 Northern District ruling, Astiana v. Hain Celestial, that dismissed claims against the use of “natural” on cosmetics packaging based on FDA’s primary jurisdiction.
Though Judge Hamilton called the question “a close one,” she said General Mills’s motion must be denied “at least at this stage of the litigation.” She acknowledged the cosmetics case precedent, but reasoned that because FDA has “signaled its relative lack of interest” in defining natural, the Janney case was different from the Astiana case because FDA had “issued no guidance.” Because “any referral to the FDA would likely prove futile,” Judge Hamilton declined to stay or dismiss Janney’s suit.
Cross-posted at WLF’s contributor page at Forbes.com
The federal Affordable Care Act, better known as “ObamaCare,” may provide activists and government a little-known wedge to advance their obesity agendas through regulated health-care providers — specifically America’s nearly 3,000 non-profit hospitals. One organization, The STOP Obesity Alliance, recently identified this wedge as a way to have such hospitals embrace its core convictions, including one principle which questions the role of personal responsibility as a cause and a solution to obesity.
Community Health Needs Assessments. Section 9007 of the Act requires non-profit hospitals, as a condition of maintaining their tax-exempt status, to conduct Community Health Needs Assessments (CHNAs). These documents, which must be filed with the IRS, will demonstrate the health needs of the hospitals’ local communities and explain how hospitals are meeting those needs. One assessment of CHNAs likened them to banks’ responsibilities under the Community Reinvestment Act, in the sense that the documents might be used as tools by activists to prompt agreements or actions. It’s likely the STOP alliance understood this when it made its “recommendations.”
STOP’s Recommendations. The STOP Obesity Alliance “strongly encourages nonprofit hospitals to overcome and prevent obesity on the following core principles.” On balance, the coalition’s principles are laudable (encourage physical activity, encourage best practices, address and reduce stigma). One recommendation — that CHNAs use a “sustained loss of five to ten percent of current weight” as a barometer to successful weight reduction — may be troublesome for hospitals. If hospitals incorporate such a specific goal into their CHNAs, and their patients don’t achieve such consistent weight loss, that could provide STOP and other advocates with the clear data they need to oppose continued non-profit status at the IRS or with a potent stick to prod hospitals to certain actions. Continue reading
Last summer in the Legal Pulse post The Ninth Circuit Rains on Plaintiffs’ Attorneys’ Class Action Pay Day, Washington Legal Foundation K.K.Legett Fellow Lauren Murphree described the U.S. Court of Appeals for the Ninth Circuit’s rejection of a class action settlement in Dennis v. Kellogg Co.
Mr. Dennis and countless other fans of Frosted Mini-Wheats claimed Kellogg’s labeling statements had unlawfully misled them. The parties ended up settling, and the district court approved the settlement. The Ninth Circuit sent the parties back to the drawing board and back to the Southern District of California. On May 3, the presiding trial judge gave preliminary approval to the new settlement.
The Ninth Circuit was understandably troubled by several aspects of the original settlement, including a $5.5 million cy pres award aimed at feeding the indigent (which was “laudable” but had “little to do with the purposes of the underlying lawsuit”) and an attorneys’ fee that came out to $2,100 an hour.
The recipients of the new settlement agreement’s smaller cy pres distribution of $4 million are three “consumer” groups: Center for Science in the Public Interest, Consumer Watchdog, and Consumers Union (Nice of the court to hand over a slush fund of cash which could fund more food labeling lawsuits, and create jobs for lawyers and court staff, likely in California). The amount of money available for allegedly harmed plaintiffs went down from $2.75 million to “$2-2.5 million.” The amount of attorneys’ fees remarkably stayed the same.
District Judge Gonzalez had some questions about these new terms. She wondered:
- How did mere identification of proper cy pres recipients result in such a severe drop in the value of the class’s claims?
- How is it that the value to the class dropped approximately 75%, while requested attorneys’ fees appear nearly constant?
Excellent questions both, but they did not forestall Judge Gonzalez from giving preliminary approval to the settlement. She did, though, order the parties to “fully address these concerns in their final approval briefing and at the final approval hearing.”
Cross-posted at WLF’s Forbes.com contributor page
Litigation by “patent-assertion entities” (PAE) was back in the news again last week with a jury decision from the Eastern District of Texas. The jury found that patents held by Alexsam Inc. which purportedly cover a system for processing pre-paid electronic gift cards were valid, allowing Alexsam’s infringement claims against Best Buy, Barnes & Noble, Gap, Home Depot, McDonald’s, JC Penny, and other retailers to advance. Whether the actions will proceed or the retailers decide to cut their losses and settle is unclear.
Claims by patent-assertion entities rarely get to the stage at which the gift card litigation currently stands. This is especially true when patent holders target purchasers and users of technology which allegedly infringe on their rights, rather than (or in addition to) the technology’s producers. When posed with the choice of investing six-figures defending a product you didn’t even create, or paying the PAE a four- or five-figure licensing fee, most small businesses will choose the latter, no matter how weak the legal claims may be.
Online technology journal Ars Technica has shined a spotlight on some of these PAE litigation threat campaigns. Several stories (here and here) document one anonymous patent holder’s systematic targeting of small businesses and even some individuals who use scanners that can send the scanned files via e-mail. The “scanner-trolling scheme,” as Ars calls it, divides up the U.S. into six areas, and in each area, a separate shell company demands $800-$1,200 licensing fees per employee to avoid a lawsuit. Another story focuses on how a Luxembourg-based PAE is suing cash-strapped public transit systems over their use of vehicle-tracking systems. The Electronic Frontier Foundation recently stepped in to request a reexamination of this PAE’s patent. Other stories have documented the litigation crusade of Innovatio, which has sued businesses offering Wi-Fi service on their premises. One law firm even has an entire section of its website devoted to the suits.
Such targeting of end users has led to calls from leaders in business and Congress to immunize such companies and individuals from patent lawsuits. While that may sound promising to under-assault small businesses, their next thought will likely be, “how many years did it take to pass the America Invents Act?” Continue reading
Cross-posted at WLF’s contributor page at Forbes.com
Perusing yet another class action complaint filed in the Northern District of California, Gitson v. Clover-Stornetta Farms, we were positively amused to find that on page 19, the plaintiffs’ lawyers cite a letter from the Food and Drug Administration (FDA) to WLF for the proposition that under federal law, a company’s website is definitively considered “labeling.” FDA’s letter was in response to WLF’s April 2001 petition urging the agency to establish a formal policy on the nature of information on websites like that of Clover-Stornetta Farms.
While it’s flattering that WLF’s public interest work has such enduring relevance and utility, we can’t let the plaintiffs’ invocation of FDA’s letter pass without refutation.
Clover-Stornetta Farms’s alleged transgression was to misleadingly refer to the sweetener used in some of its yogurt products as “evaporated cane juice.” Misleading or false labeling under federal law, incorporated into the California laws under which Gitson is suing, renders the product “misbranded.” And according to the complaint, because the yogurt label referred to the company’s website (which did little more than helpfully reprint the ingredient label), the website constituted labeling which equally misbranded the product. Continue reading
Cross-posted at WLF’s Forbes.com contributor site
The wave of tort suits under the Alien Tort Statute (ATS) may not be brought to an end as a result of a decision issued yesterday by the U.S. Supreme Court, Kiobel v. Royal Dutch Petroleum, but it is likely to subside considerably. For the past several decades, the ATS has served as the favorite vehicle of human rights activists seeking to challenge the overseas business practices of U.S. corporations, but the Supreme Court has now ruled that the ATS applies only to conduct within the United States or on the high seas.
The ATS is a 1789 law that grants jurisdiction to federal courts to hear tort claims by aliens alleging violations of “the law of nations.” The law lay dormant for two centuries, primarily because litigants assumed that the number of torts to which the law applied was extremely narrow – perhaps limited only to claims by foreign ambassadors that they had been assaulted in this country. But in 1980, the U.S. Court of Appeals for the Second Circuit held in Filartiga v. Pena-Irala that the ATS applied to a wide array of alleged human rights violations. In the decades that followed, activists sued U.S. corporations under the ATS for an increasing variety of overseas activities, from operating facilities that allegedly polluted the environment to administering medications without allegedly first providing informed consent to giving financial support to oppressive foreign governments. WLF has been actively involved in many of those suits, opposing expansive interpretations of the ATS, including through an amicus brief in Kiobel. Continue reading
Cross-posted at WLF’s Forbes.com contributor page
With class action lawyers still buzzing around food makers like angry gnats in summer, targets of these labeling and marketing suits welcome any instance where a federal judge gets the fly-swatter out and slaps down a case or two. Or three, as we’re about to describe.
Evidence, Why do We Need Evidence?: Ries v. AriZona Beverages. We’ve been a bit hard on the U.S. District Court for the Northern District of California (aka “The Food Court”). We’ve even been critical of Judge Seeborg’s ruling in Ries late last year. His latest ruling in this “high fructose corn syrup (HFCS) and citric acid are not ’100% natural’” class action, however, hits the spot just like cold ice tea. The defendants moved for summary judgment based on the fact that Ries had not provided evidence that HFCS and citric acid are artificial. Judge Seeborg had granted Ries discovery last September and urged her to find such evidence.
As the judge wrote in his March 28 ruling, “Plaintiffs have not introduced any evidence showing that HFCS or citric acid are artificial.” The plaintiffs urged Judge Seeborg to “take judicial notice” of the fact that federal patents have been issued for the process of producing HFCS, which they claimed proved it was not natural. The judge saw this as “an extension of their rhetoric,” and that “In the face of a motion for summary judgment, rhetoric is no substitute for evidence.” Separately the judge also found that there was not a “scintilla of evidence” to support damages in the case, and that due to the attorneys’ failure “to prosecute this action adequately,” the class action should be decertified due to inadequate representation. Continue reading
by John Andren*
What kind of attorneys’ fees would you expect cynically self-styled “advocates for the disabled” would request for their efforts in winning their client $14.31 in damages? Credit to those of you who guessed $15,172.50. That’s the exact amount that two plaintiffs’ lawyers recently sought after winning a default judgment against a Brooklyn business for allegedly violating the Americans with Disabilities Act (ADA) on behalf of their possibly imaginary (more on that below) client.
The U.S. District Judge, who had requested to hear the motion after presiding over another case filed by the same plaintiff on the very same day, not only denied the lawyers’ request for fees. He also issued a scathing twenty-page decision in which he derided the lawyers for their use of landmark civil rights legislation as a façade for a new type of ambulance chasing: the mass filing of ADA claims against businesses in an effort to extract settlements and/or attorneys’ fees from owners intimidated by the prospect of costly and uncomfortable litigation.
The judge found that, among other things, the repeated use of “boilerplate” pleadings and the sheer number of cases filed by the same plaintiffs and attorneys demonstrated that the case before him, and others like it, are “less about ensuring access for those with disabilities and more about lining counsel’s pocket.”
The lawyers’ fee request had been based on an estimate of services billed out at an hourly rate of $425 for 35.7 hours of work. Considering the prevailing rate for similar work tops out at $350 for experienced partners, and the clear record of ineptness with which plaintiff’s counsel handled this and previous pleadings, the judge found that an hourly rate of less than half the requested number would more accurately reflect the skill and expertise of plaintiff’s counsel. Continue reading
Cross-posted at WLF’s Forbes.com contributor site
Federal Rule of Civil Procedure 11, which in part authorizes the imposition of sanctions on attorneys who sign frivolous pleadings in federal court, is not used nearly as much as it should be. But that may be changing a little, at least in the U.S. Court of Appeals for the Seventh Circuit.
In a recently issued 18-page ruling, Judge Richard Posner authored a unanimous panel opinion reversing an Illinois district judge’s failure to impose Rule 11 sanctions on attorneys with the firm Robbins Geller Rudman & Dowd. The factual background reads like a scenario plucked directly from a law school ethics exam.
Seeking hundreds of millions of dollars in damages, plaintiffs filed a putative class action alleging that Boeing Company, along with its CEO and the head of its commercial aircraft division, committed securities fraud in violation of federal law. The district judge dismissed the complaint for failing to allege sufficient facts to properly plead the requisite scienter for fraud. Not to be deterred, plaintiffs promptly filed an amended complaint, but this time with detailed bombshell revelations from a confidential source. Ultimately, however, the allegations in the amended complaint could not withstand even the slightest scrutiny.
As Posner describes it:
The plaintiffs’ lawyers had made confident assurances in their complaint about a confidential source—their only barrier to dismissal of their suit—even though none of the lawyers had spoken to the source and their investigator acknowledged that she couldn’t verify what (according to her) he had told her.
Their failure to inquire further puts one in mind of ostrich tactics—of failing to inquire for fear that the inquiry might reveal stronger evidence of their scienter regarding the authenticity of the confidential source than the flimsy evidence of scienter they were able to marshal against Boeing.
Noting that the same law firm had been accused of “similar conduct” in three other reported cases, Posner remanded the matter back to the district judge, who would be in a better position to calculate a dollar amount for Rule 11 sanctions.
The case is City of Livonia Employees’ Retirement System v. The Boeing Co.