Background and District Court Ruling
Johnson & Johnson (J&J) manufacturers Benecol® butter substitute products (Benecol). The labels for the products state that Benecol contains “NO TRANS FAT,” and the “Nutrition Facts” box notes the “Amount/Serving” of “Trans Fat” as “0g.” The labels also made claims about the products’ ability to lower cholesterol, such as “Proven to Reduce Cholesterol.”

The plaintiff filed suit against J&J, alleging that the trans fat and cholesterol statements were false and misleading because Benecol contained small amounts of trans fats, which could be detrimental to heart health. Plaintiff also claimed that he paid a premium for these products in reliance on the purported false and misleading claims. J&J filed a motion to dismiss the claims arguing that plaintiff lacked standing for failure to adequately plead an injury-in-fact and his claims were expressly preempted by the FDCA.  The District Court agreed and dismissed the case.

“NO TRANS FAT” Claim Preempted
Plaintiff argued on appeal that although FDA regulations authorize Benecol to claim “0g Trans Fat Per Serving,” the regulations do not expressly permit a claim of “NO TRANS FAT” for the product as a whole. The Third Circuit rejected this argument, noting that the “FDA has long recognized this potential for a discrepancy” and has issued regulations that “authorize nutrient content claims based on per serving amounts, even if those claims are not entirely accurate on a per product basis.” As such, plaintiff sought to impose state law requirements that were not identical to the FDCA, and his “NO TRANS FAT” claim was expressly preempted.

Cholesterol Claims Preempted
Plaintiff also contended on appeal that his claims were not preempted because he sought to impose state law requirements that were identical to federal regulations prohibiting false and misleading health claims. The Court of Appeals disagreed, holding that J&J was permitted to make heart health claims regarding Benecol based on the product’s plant stanol esters content because those claims are authorized by FDA regulations (21 C.F.R. §§ 101.14 and 101.83).

Plaintiff argued that the “Proven to Reduce Cholesterol” claim was false and misleading because this statement was expressed in reference to the product as a whole, which contains harmful trans fats, and not in reference to the product’s plant stanol esters content. The Court rejected this argument, noting that FDA regulations specifically authorize these cholesterol claims based solely on the product’s plant stanol ester content.

Conclusion
The Young decision is strong support for express preemption arguments under the FDCA, particularly for cases involving trans fat and other nutrient content and health claims. Even though the Third Circuit stated that the decision is “non-precedential,” it is nonetheless persuasive authority for how courts should analyze claims in similar cases.

The Organic Food Production Act vests authority in the NOP to establish a “National List of Allowed and Prohibited Substances” (“National List”) with regard to “organic” or “made with organic…” products. To determine whether a substance is allowed or prohibited, it must first be determined whether the substance is “natural (nonsynthetic)” or “synthetic.” How these terms are defined is thus critical to determining whether a substance is included on the National List, and where on the National List it should be placed.

As a result, the National Organic Standards Board (“NOSB”) (the NOP’s advisory board) has focused a great deal of time and energy over the years on determining what qualifies as “natural” and what does not. These efforts recently led the NOSB to issue the above-cited draft guidance, which is intended to implement and clarify previous recommendations and existing practices of the NOSB. In addition to offering their own definitions of “natural” and “synthetic” in the “organic” context, the NOP’s guidance includes a “Decision Tree for Classification of Materials as Synthetic or [Natural] Nonsynthetic.” This draft guidance (and any resulting final guidance) should therefore be carefully reviewed by organic and nonorganic food producers alike—especially those who make “natural” claims on their labels.

Comments on the draft guidance are due by June 3, 2013. Yet to be seen is whether the NOP will address some apparent confusion in the draft guidance (for example, why certain minerals are classified as synthetic simply because they undergo a chemical change caused by heating the mineral) or the existence of the FDA’s and the Food Safety and Inspection Service’s “natural” policies.

Challenging HFCS and Citric Acid as “Natural”

The plaintiffs in the AriZona case challenged the defendants’ advertising, marketing, selling, and distribution of AriZona Iced Tea drinks labeled “All Natural,” “100% Natural,” and “Natural” because they contained high fructose corn syrup (HFCS) and citric acid.  The plaintiffs’ UCL, CLRA, and false advertising claims survived a motion to dismiss and a California class was certified for purposes of injunctive and declaratory relief.  See our prior post here.  After the close of discovery, the defendants filed a motion to decertify the class and renewed a previous motion for summary judgment arguing that the plaintiffs failed to prove that HFCS and citric acid are not natural.  This time the Court agreed.

Plaintiffs’ Evidence:  “United States Patent law” Related to Processing HFCS

First, the Court found that the plaintiffs failed to produce any evidence that HFCS and citric acid are artificial.  Instead, the plaintiffs requested that the Court take judicial notice of “United States Patent law” and rule that HFCS is not natural because there are patents related to the process of producing it.  The Court rejected this argument out of hand, stating that “United States Patent law” is not a proper subject of judicial notice.  Moreover, the plaintiffs cited “no legal authority supporting their contention that if the process to produce an ingredient is patented, that fact, in and of itself, automatically renders it artificial.”

Plaintiffs’ Failure to Prosecute Their Case with Diligence

Second, the Court chided the plaintiffs for failing to prosecute their case, stating that the attorneys’ efforts did not “begin to approach diligence.”  In particular, the plaintiffs failed to identify experts who could support their natural claims within case deadlines.

No Evidence of “Premium” Paid for AriZona Icea Tea

Third, the Court found that the plaintiffs failed to produce “a scintilla of evidence” to support their claims for restitution or disgorgement under the UCL or FAL.  The Court had previously ruled that even if the beverages the plaintiffs purchased were not all natural, those beverages still had some market value.  The measure of restitution “must be based in evidence establishing the difference between the value of an AriZona Iced Tea billed as all-natural and the value of a comparable beverage not marketed or sold at a premium due to such claims.”

Defendants’ Evidence Showing HFCS and Citric Acid Are Natural

Finally, in addition to deficiencies in the plaintiffs’ evidence, the defendants produced evidence to show that HFCS and citric acid are, in fact, natural.  The evidence consisted of an expert report, declarations from HFCS suppliers reflecting that the HFCS that the defendants supply accords with the FDA natural policy, and a certificate of the natural status of defendants’ citric acid from one of their citric acid suppliers.

Take Away

This case has larger ramifications for companies defending against “all natural” claims.  This case is about much more than the plaintiffs’ failure to prosecute their case and come forward with scientific evidence showing the iced tea is not “all natural.”  The decision shows real skepticism toward these types of lawsuits, which is a trend we’ve started to see in which courts are requiring plaintiffs to come forward with more than just junk science in support of their attack on “all natural” claims.

Cardona claimed that California Department of Food and Agriculture code prohibited the removal of pollen from honey, and that the sale in California of honey without pollen as “honey” was misleading and deceptive. In dismissing Cardona’s case with prejudice, the court examined the provisions of the NLEA and its regulations in careful detail. Defendants Target and Honeytree (represented by MoFo litigators Dave McDowell and Purvi Patel) argued that there was no reasonable dispute whether their product was honey, and that any requirement to call honey something other than honey on the label would render the food misbranded under federal law. Defendants further argued that where there is no federal standard of identity, as is the case for honey, under the NLEA honey must be labeled with its “common or usual name” (which is “honey”). See NLEA Sections 343-1(a)(3) and 343(i)(1). Thus, the California requirements cited by Cardona were preempted by Section 343-1(a) of the NLEA, which prohibits any state standard that is not “identical” to the federal requirement.

The court agreed. Citing the legislative history and the NLEA’s goal to “further uniformity to reduce consumer confusion,” the court concluded that the federal common-name labeling requirement applies in this case, and that honey must be called honey, irrespective of pollen content. The court rejected Cardona’s argument that California could issue separate standards of identity that govern labeling where the FDA had not established a federal standard of identity. In its final blow to Cardona’s case, the court rejected the argument that use of the word “pure” in describing the honey was independently actionable, finding that Cardona’s entire case was based on the same theory — namely, that the honey she allegedly bought was neither pure nor truly “honey” because it contained no pollen. On that basis, and because Cardona could not plausibly allege the addition of any ingredient that would render the use of the term “pure” misleading, the court concluded that the word “pure” did not provide a separate basis for Cardona’s claims.

Background.  Dukes made clear that preliminary issues of class certification will likely require district courts to resolve “overlapping” merits questions.  Dukes did not, however, answer how courts should resolve overlapping merits questions, and lower courts have differed significantly in the level of scrutiny they apply to those questions and to the evidence that is submitted at the class certification stage.  Behrend—the first Supreme Court decision to apply Dukes—directly addresses that issue by requiring a district court to scrutinize a class plaintiff’s damages evidence at the class certification stage to ensure that evidence could actually prove damages on a class-wide basis for the particular liability theory asserted.

Facts.  In Behrend, cable customers alleged that Comcast “clustered” its cable television operations within a particular region by acquiring competitor cable providers in the region, and swapping its own systems outside the region for competitor systems located in the region. The cable customers alleged Comcast’s practice harmed competition and artificially raised customer prices, in violation of antitrust laws.  The cable customers sought class certification under Rule 23(b)(3), which allows damages-based class relief where “questions of law or fact common to class members predominate over any questions affecting only individual members.”  The customers alleged four distinct theories of harm to competition, and offered an expert’s statistical model to prove that the damages resulting from that harm were measurable on a class-wide basis.  In opposition to class certification, Comcast challenged all four theories, as well as the customers’ damages evidence—an expert report—because the expert’s model lumped together all the customers’ purportedly improper theories of harm and did not isolate damages attributable to any one theory.  Although the district court rejected three of the four theories as inapplicable to the class as a whole, it accepted the expert’s model and certified the class.  The Third Circuit affirmed, holding that Comcast’s challenge to the model would improperly require the district court to assess the merits of the expert’s methodology at the class certification stage.

Opinion.  Reversing, the Supreme Court held that the district court was required to assess whether the expert’s damages methodology could apply class-wide.  Quoting extensively from Dukes, Justice Scalia’s majority opinion noted that “[b]y refusing to entertain arguments against respondents’ damages model that bore on the propriety of class certification, simply because those arguments would also be pertinent to the merits determination, the Court of Appeals ran afoul of our precedents requiring precisely that inquiry.”  By accepting the expert’s damages model, the lower courts failed to address the fact that plaintiffs’ damages model incorporated three theories of harm that the court held inapplicable on a class-wide basis.  Thus, “[t]here is no question that the model failed to measure damages resulting from the particular antitrust injury on which petitioners’ liability in this action is premised.”  As such, the damages model could not credibly show the predominance of a common damages question unless the model showed damages attributable to the only remaining legally valid theory of harm.  Because the analysis failed to do so, certification of the class was improper: 

The Court of Appeals simply concluded that respondents “provided a method to measure and quantify damages on a classwide basis,” finding it unnecessary to decide “whether the methodology [was] a just and reasonable inference or speculative.”  Under that logic, at the class-certification stage any method of measurement is acceptable so long as it can be applied classwide, no matter how arbitrary the measurements may be.  Such a proposition would reduce Rule 23(b)(3)’s predominance requirement to a nullity.

Dissent.  For its part, Justice Ginsburg’s and Justice Breyer’s dissent (in which Justices Sotomayor and Kagan joined) attacked the majority for, among other things, potentially “requiring, as a prerequisite to certification, that damages attributable to a class-wide injury be measurable on a class-wide basis.”  The dissent further stated that the predominance requirement “scarcely demands commonality as to all questions” and that when adjudication of questions of liability common to the class will achieve economies of time and expense, the predominance standard is generally satisfied “even if damages are not provable in the aggregate.”  The dissent also attacked the majority for improperly “consider[ing] fact-based matters” at the class certification stage.  The dissent also attempts to confine the majority’s decision “for this day and case only.”

Impact.  Behrend promises to pose extensive challenges to plaintiffs at the class certification stage from here on out.  Clarifying Dukes and offering much-needed guidance to district courts currently grappling with certification questions, Behrend presents defendants with new ammunition at the class certification stage to challenge a plaintiff’s ability to prove class-wide damages.  Clients facing Rule 23(b)(3) class actions should renew their focus on attacking plaintiffs’ damages evidence at the class certification stage, particularly where viable questions exist as to the applicability of a damages model to the class as a whole, or when the model is not carefully tied to plaintiffs’ theory of liability.  Even if the damages theory could apply on a class-wide basis, the opinion leaves open another potential avenue for attacking plaintiffs’ damages claims: whether the expert survives scrutiny under Daubert—a question the Court declined to address in this case.  In any event, the opinion makes clear that plaintiffs must tie their damages claims to liability, and they must show their damages claims are viable at the class certification stage.  Despite a recent trend to the contrary, the Behrend decision breathes new life into the notion that individualized issues as to damages can defeat a class—a point defendants should consider when assessing how to oppose class certification. 

As background, the FTC issued a complaint against POM Wonderful LLC, and certain of its officers (collectively, “POM”) in 2010, alleging POM deceptively advertised its products as treating, preventing, or reducing the risk of heart disease, prostate cancer, and erectile dysfunction.  In May 2012, FTC Administrative Law Judge D. Michael Chappell held that 19 POM products were indeed falsely or deceptively advertised.  POM appealed the decision, and, on January 16, 2013, a panel of FTC commissioners issued a final order (“Order”).   The Order upheld Judge Chappell’s decision, and in fact went beyond it, finding 36 products were falsely advertised.  The Order states repeatedly that the decision is limited to POM and the circumstances of its products and advertising.  However, there are several holdings noteworthy to our readers:

• While holding that “competent and reliable scientific evidence” remains the standard for making representations regarding a product’s effectiveness in the diagnosis, cure, mitigation, treatment, or prevention of any disease, the Order holds that such claims by POM require “at least two randomized and controlled human clinical trials,” and that such trials must “yield statistically significant results” and be “double-blinded.” 
• For claims regarding the health benefits, performance, or efficacy of a product, “competent and reliable scientific evidence means tests, analyses, research, or studies that have been conducted and evaluated in an objective manner by qualified persons and are generally accepted in the profession to yield accurate and reliable results.” 
• Moreover, a health claim need not include the words “established” or “clinically proven” in order to be held to such standards.  Simply using images of white lab coats, discussing the amount of money spent on medical research, or referring to a scientific publication could require the claim to meet the “competent and reliable scientific evidence” tests above.  Qualifying claims with “may” or “can,” or using humor or hyperbole also did not preclude a claim from meeting these standards.

Finding that POM’s conduct is “serious and deliberate,” the Order requires POM to cease and desist such advertising.  On March 8, POM filed a petition for review in the D.C. Circuit Court of Appeals, arguing primarily that the Order unconstitutionally violates POM’s First Amendment rights.  Stay tuned for updates on the outcome of that review. 

The suit was brought on behalf of a nationwide class of purchasers of Ensure shakes and other products containing Revigor, a source of amino acid metabolite HMB. Abbott allegedly advertises these products as helping to “rebuild muscle and strength naturally lost over time.” Interestingly, the plaintiff did not merely allege that the product failed to rebuild muscle, as promised. Rather, the plaintiff argued that Abbott’s advertising is misleading because it does not disclose that the Ensure products cannot work unless used in combination with exercise. The complaint explicitly cited several scientific studies in support of plaintiff’s argument, which the court treated as part of the pleadings.

Judge Stephen V. Wilson found plaintiff’s allegations deficient under Rule 8’s plausibility standard:

“Plaintiff’s naked assertion that the representation is misleading is nothing more than a legal conclusion… To allege a likelihood of deception, Plaintiff must set forth well-pleaded facts indicating beyond speculation that the Products only deliver the claimed health benefits to adults who exercise.” Id. at *6.

The court reached this conclusion after reviewing each of the cited scientific studies in detail. Ultimately, Judge Wilson disagreed with the plaintiff’s interpretation of the scientific evidence, finding instead that the studies showed that subjects who did not exercise still experienced increases in muscle mass from the Ensure ingredients:

“None of the articles are apposite as they fail to test the precise combination of ingredients in the Products. Even ignoring this problem, however, the [named] studies each produced data that persons taking a blend of HMB and amino acids rebuilt muscle and strength without exercise.” Id. at *16.

Judge Wilson dismissed the complaint with leave to amend but warned that amendment would likely be futile “given [Plaintiff’s] repeated failure to identify studies or other facts to plausibly support his claims.”

The decision suggests a trend that ought to give hope to defendants in these cases. Where it once appeared sufficient merely to allege that a product didn’t perform as promised, courts are increasingly requiring plaintiffs to come to the table with real supporting evidence, rather than conclusory allegations, of false advertising.

Under CAFA, defendants can remove a case to federal court if the aggregated amount in controversy exceeds $5 million and if there is minimal diversity between the parties. Shortly after CAFA’s enactment, the plaintiffs’ bar employed a strategy of avoiding CAFA jurisdiction by alleging in the complaint that the plaintiff and the class stipulate that they will not seek to recover total damages that exceed $5 million. This strategy was successful in the Eighth and Ninth Circuits, which held that such stipulations are effective in avoiding CAFA jurisdiction.[1] The Fifth, Seventh, and Tenth Circuits, on the other hand, determined that such stipulations are not binding, particularly if the defendant is able to establish that the actual amount in controversy, absent the stipulation, exceeds $5 million.[2] As a result, the plaintiffs’ bar flocked to the Eighth and Ninth Circuits, where many defendants have subsequently found themselves defending against class actions without any hope of removal. Until now.

Standard Fire involves a putative class action filed by the plaintiff, Greg Knowles, in Arkansas state court on behalf of a class of Arkansas policyholders. Knowles alleged that Standard Fire unlawfully failed to include a general contract fee when it made certain homeowner’s insurance loss payments. With respect to the relief sought, he alleged in his complaint that the “plaintiff and Class stipulate they will seek to recover total aggregate damages of less than five million dollars.” He also attached an affidavit in which he stipulated that he “will not at any time during this case … seek damages for the class … in excess of $5,000,000 in the aggregate.” Standard Fire removed the case to federal court under CAFA. The district court remanded the case back to state court, finding that the stipulation controlled even though the total amount in controversy would exceed the $5 million threshold.   

The Supreme Court disagreed, holding that

“a plaintiff who files a proposed class action cannot legally bind members of the proposed class before the class is certified.” Standard Fire Ins. Co. v. Knowles, No. 11-1450, slip op. at 4 (Mar. 19, 2013).

At the time plaintiff filed his complaint (pre-certification), he lacked authority to bind anyone but himself and thus “has not reduced the value of the putative class members’ claims.” Id. “To hold otherwise,” the Court stated, “would, for CAFA jurisdictional purposes, treat a nonbinding stipulation as if it were binding, exalt form over substance, and run directly counter to CAFA’s primary objective: ensuring Federal court consideration of interstate cases of national importance.” Slip op. at 6 (internal quotations omitted).

Gluten, a naturally occurring protein in wheat, rye, and barley (and some crossbred hybrids of these grains) can wreak havoc on the digestive systems of those who suffer from celiac disease (CD) and other gluten sensitivities or allergies. When they ingest gluten-containing products, an abnormal immune response is triggered, causing production of antibodies that attack the lining of the small intestine. This can lead to various symptoms, including abdominal pain, bloating, vomiting, and general intestinal discomfort. Failure to adhere to a strict gluten-free diet may increase the risk of related conditions, such as autoimmune disorders, liver disease, and infertility.

The FDA’s proposed rule sets a 20-parts-per-million threshold for labeling products “gluten free.” Under the rule, foods claiming to be gluten-free must contain 20 parts per million or less of gluten. The agency based its proposal, in part, on currently available methods for detecting gluten, which are unreliable below this level. In addition, the 20-parts-per-million threshold is consistent with the standard set by the Codex Alimentarius Commission, which has been adopted as the controlling standard by many countries throughout the European Union.

The proposed rule, which has been the subject of much debate and comment, may be a welcome development for both consumers and food producers alike, who, in the absence of any FDA regulation or guidance, have been left uncertain as to what properly (and safely) qualifies as “gluten-free.” Check back with us for more up-to-date developments on implementation and enforcement as the FDA’s new “gluten-free” regulations take effect.