Update: Judge Rejects Settlement in Ben & Jerry’s “Natural” Class Action

Cross-posted at WLF’s Forbes.com contributor site

In our June 21 post, “Natural” Selection: Survival of the Litigious, we noted that consumer class action target Ben & Jerry’s decided to settle with the “deceived” plaintiffs once a judge on “The Food Court” (aka the U.S. District Court for the Northern District of California) denied their motion to dismiss. The plaintiffs in Astiana v. Ben & Jerry’s were claiming that because the company used cocoa processed with a synthetic ingredient, it couldn’t lawfully call its ice cream “all natural.”

We learned today (hat tip to Shook, Hardy & Bacon and its excellent Food & Beverage Litigation Update) that presiding Judge Hamilton rejected the settlement on September 12. Ruling from the bench, she found the proposed settlement legally unconscionable. The proposal had set up a $7.5 million fund for the plaintiffs. Under the cy pres doctrine, the court would distribute any amount remaining after plaintiffs had asserted their claims to “not-for-profit charities related to food or nutrition in the United States.” For themselves, the class action attorneys sought $1.8 million in fees.

According to an attorney present at the September 12 hearing, Judge Hamilton stated that she had incomplete information on how the cy pres funds would be rewarded.  A Ninth Circuit ruling from last July, Dennis v. Kellogg Co. (see our post on that here) may have given Judge Hamilton pause.  The plaintiffs devoted a lengthy footnote (n. 6) in their proposed settlement explaining why their cy pres proposal was not disconnected from the misleading advertising claims, as the appeals court found in Kellogg (there, Kellogg products were to be donated to a food bank). Yesterday, both parties filed a motion with the judge seeking a status conference and noted that they had “new information” to share, so perhaps Ben & Jerry’s and the class action lawyers will provide specifics on the possible cy pres recipients.

Interestingly, one of the members of the nationwide class in Astiana, Illinois resident Colleen Tobin, not only filed an objection to the settlement but has filed her own nationwide class action against Ben & Jerry’s in a New Jersey federal court (Tobin v. Conopco and Ben & Jerry’s). She filed suit September 13, the day after Judge Hamilton rejected the Astiana settlement, alleging that Ben & Jerry’s ice cream was not all natural due to synthetic cocoa and because it contained genetically modified organisms. On September 21, Tobin filed a motion to transfer her suit to—you guessed it—the Northern District of California, where it seemingly could be consolidated with the Astiana class action. It remains unclear whether Ben & Jerry’s will contest the motion.

We will keep an eye on this case to see if it enters The Food Court, and if so, what impact it will have on the settlement of Astiana.

Mandated Biotech Food Labeling Proposal: Regulate to Eliminate?

Genetically-enhanced wheat

Cross-posted at WLF’s Forbes.com contributor site

A story from the London desk of Reuters last week discussed European scientists’ skeptical response to a new French study claiming to show health risks (to rats) from genetically engineered corn. The story concluded by stating:

The study is also likely to create friction in the United States, where opponents of genetically engineered foods in California are fighting to have all GMOs removed from the food supply.”

Does this reflect a misunderstanding of the mandated biotech food labeling campaign (aka “Proposition 37”) in California, or are these reporters on to something? Is the purportedly benign goal of “informing consumers” veiling Prop 37 supporters’ larger purpose?

When considering this question, you should examine the actions of the Prop 37 campaign and the statements of some its biggest supporters. Prop 37’s supporters need Californians to embrace their perspective that genetically engineered foods are risky or dangerous. From the “Findings and Declarations” in the proposal to the alarming ads the campaign has run, biotech foods have been subjected to heavy doses of demonization. Prop 37 supporters’ latest PR efforts focus around promoting this curiously timed French study, the methodologies and motivations of which have been panned by respected scientists.

The Yes on Prop 37 campaign’s largest financial supporter, an Illinois-based dietary supplements and alternative health company called Mercola Health Resources,  offers “frightening facts” about the “dangerous health effects” of biotech foods on their website. Ronnie Cummins, the associate director of the second largest pro-Prop 37 contributor, the Organic Consumers Association, told the New York Times that a biotech food label is a “kiss of death,” and that with Prop 37, “we will be on our way to getting GE-tainted foods out of our nation’s food supply for good.” For further clues into why Cummins and his group support Prop 37, read the open letter he penned last month urging the organic community to support the initiative. Continue reading “Mandated Biotech Food Labeling Proposal: Regulate to Eliminate?”

Compelled Speech: Is California the Too Much Information State?

Cross-posted at WLF’s Forbes.com contributor site

Can you hear me now?

It’s difficult to hear any meaningful information amongst the government mandated noise in California.  Several innocuous products now sport the ubiquitous Prop 65 warnings–which indicate that the product contains materials the state alleges are linked to cancer.  And should Prop 37 pass in November, genetically modified foods will have to be labeled as such, despite consensus among leading scientific organizations (such as the Food and Drug Administration and the World Health Organization) that genetically modified foods are perfectly safe for consumption.

Recently, the city of San Francisco endeavored to add to this noise, by enacting an ordinance that would mandate disclosures on the purported risk of cancer associated with cell phone emissions.  In CTIA-The Wireless Association v. City of San Francisco, however, the Ninth Circuit affirmed the lower court’s decision that the mandated disclosures themselves were “misleading and controversial,” and thus violated cellular retailers’ First Amendment rights.

Because mandated disclosures implicate First Amendment concerns, the Supreme Court has ruled that any governmentally compelled speech much be “purely factual and uncontroversial.” Zauderer v. Office of Disciplinary Counsel.  In CTIA, the court found that San Francisco’s compelled speech, including recommendations for consumers who wish to reduce their exposure to cell phone emissions, implied that the city adjudged cell phone use to be dangerous.  This implication was neither factual nor uncontroversial.  As the court noted, the FCC has determined what levels of radio frequency energy exposure are safe, and has concluded that cell phones are squarely within these limits.  Further, the scientific community lacks consensus on the matter, and the city itself admitted that there is no evidence that cell phones cause cancer.  The relation between cell phone emissions and cancer risks apparently amounts to mere conjecture, a conjecture that the government could not force businesses to disseminate.

But there’s the rub.   Government compelled speech, even where factual, implies that there is a danger that must be warned of.  With regard to Prop 37, the mandatory disclosures only require that genetically modified food have a label to that effect.  But this label implies a hazard that the scientific community has yet to confirm the existence of.  Further, we now know that the act’s regulation of the use of the term “all natural” pertains not only to genetically modified foods, but to plain old processed foods as well–which means that the purveyors of frozen or canned foods can no longer call their products “natural.”  Under this rationale, frozen broccoli is not natural. Continue reading “Compelled Speech: Is California the Too Much Information State?”

Instructive Federal Court Opinion in Dismissal of Cheerios Class Action

Cross-posted at WLF’s Forbes.com contributor page

  • “They keep my belly full.”
  • “I like the simple ingredient list.”
  • “It’s offered in many flavors.”
  • “They are very edible.”

Those are all very good reasons why people buy Cheerios. They are not, however, good reasons to file a class action lawsuit against the maker of Cheerios, General Mills, for damages. Thankfully, that’s what a federal district court judge in New Jersey essentially found on September 10 in In re Cheerios Marketing and Sales Practice Litigation. The opinion is marked as “Not for Publication,” but Judge Sheridan’s reasoning on the issue of standing to sue is very instructive for other food and beverage companies facing consumer class actions.

The decision arose from a number of class action lawsuits filed in different federal courts and consolidated in the District of New Jersey. The claims piggybacked off of a 2009 Food & Drug Administration (FDA) warning letter. FDA informed General Mills that the company could not make specific cholesterol reduction claims about Cheerios without submitting the product to the formal drug approval process. General Mills made immediate changes to Cheerios labeling and marketing, but the class action lawyers pounced anyway, arguing that their clients either purchased Cheerios mistakenly relying on the cholesterol claims or paid more for Cheerios than they were worth. Continue reading “Instructive Federal Court Opinion in Dismissal of Cheerios Class Action”

Finger on the Pulse: From Our Blogroll and Beyond

  • Private antitrust class actions against generic-branded drug patent settlements start to pile up in wake of In re K-Dur ruling, impending SCOTUS appeal (On the Case)
  • The SEC does a bit of Foreign Corrupt Practices Act reform in its Resource Extraction Disclosure final rule (FCPA Professor)
  • That didn’t take long: First “inter partes” post-grant patent challenge filed at PTO one day into new review process initiated by America Invents Act (Corporate Counsel)
  • Top five corruption risks for pharma and medical device manufacturers (Corruption, Crime & Compliance)
  • Supreme Court given opportunity to rule on how “final” FDA warning letters are for purposes of judicial review (Drug & Device Law; FDA Law Blog)
  • Greenpeace works to undermine development of vitamin-enhanced “golden” rice (Toronto Globe and Mail via Overlawyered)

Under Congressional Mandate, SEC Slowly Moves Towards Recognition of First Amendment

Cross-posted at Forbes.com’s WLF contributor page

In a post last February, Supreme Court Cert Petition Spotlights Speech Limits on Securities Market, we urged the Justices to review a Massachusetts high court ruling which prevented communication about investment opportunities. The Court denied certiorari on May 14, but by that time, securities issuers like the petitioner in that case, Bulldog Investors, had a new, and improbable, champion for its speech rights—Congress.

The JOBS Act, which became law on April 5, includes a provision ordering the Securities and Exchange Commission (SEC) to eliminate a rule prohibiting “general solicitation” in situations where “accredited investors” are participating in the offering process. The prohibition takes the form of a condition for certain securities offerings. Under Rule 506 of SEC Regulation D, issuers who target accredited investors (i.e. rich and sophisticated persons and entities) and who refrain from solicitation (i.e. direct marketing, print or broadcast ads, websites, seminars) don’t have to register their offerings with the SEC. In other words, the issuers only get a benefit (no registration) if they surrender their speech rights.

As Bulldog Investors argued in its cert petition, such limitations tread on issuers’ commercial speech rights and are a significant impediment in the formation of capital, especially for startups. SEC’s own Advisory Company on Smaller Public Companies concurred with the latter point, as did Congress when it drafted the JOBS Act. The Act ordered SEC to eliminate the speech restraint within 90 days. Continue reading “Under Congressional Mandate, SEC Slowly Moves Towards Recognition of First Amendment”

New Video Commentary on Antitrust Campaign Against Drug Patent Settlements

Commentator Kurt Karst is a partner with Hyman, Phelps & McNamara and blogs on pharmaceutical law and policy issues at the firm’s FDA Law Blog.  His most recent post is on this subject, Patent Settlement Agreements: The Next Barrage.

Past Legal Pulse posts on “reverse payment” patent settlements include: