United States: Expansion Of Liability In Product Labeling Cases

Summary

An unprecedented surge in consumer fraud lawsuits over the last several years has consumers and lawyers closely scrutinizing product labels and advertisements. While many of these claims challenge the veracity of "Organic," "Healthy," and "100%" claims on labels, several states are affording new opportunities to attack ingredient labels under state consumer fraud and labeling statutes—an area that federal courts have traditionally found to be preempted with no private right of action.

In Depth

An unprecedented surge in consumer fraud lawsuits over the last several years has consumers and lawyers closely scrutinizing product labels and advertisements. While many of these claims challenge the veracity of "Organic," "Healthy," and "100%" claims on labels, several states are affording new opportunities to attack ingredient labels—an area that federal courts have traditionally found to be preempted by the Food and Drug Administration (FDA) with no private right of action. Certain state statutes are changing that landscape.

The Nutrition Labeling and Education Act (the NLEA or the Act), which amended the Federal Food, Drug, and Cosmetic Act (the FDCA) to give the FDA authority to require nutrition labeling on virtually all food products (Nutrition Labeling and Education Act, 21 U.S.C. § 343 et seq.), provides no private right of action for individuals to enforce the provisions of the Act. Furthermore, the NLEA contains a preemption provision mandating that no state law claim can impose any food labeling requirement that is "not identical" to the Act's own requirements. (21 U.S.C. § 343-1(a).) Despite the preemption language, plaintiffs often attempt to bring consumer fraud actions based on violations of these federal ingredient label requirements. The vast majority of case law in this area has held that such consumer fraud actions are preempted by the FDA and that there is no private right of action for consumer fraud based on this theory. Because the language and requirements for liability of consumer fraud statutes in most states are "not identical" to the FDA regulations, courts presiding over an individual state law action alleging false or misleading labeling have traditionally dismissed plaintiffs' claims, finding that they are preempted by federal law. See, e.g., Stansfield v. Minute Maid Co., 124 F.Supp.3d 1226 (N.D. Fla. 2015).

However, a number of states have enacted legislation that seems to complicate this federal preemption analysis. Starting with California, several states enacted statutes prohibiting the mislabeling of food that is identical to the requirements of the FDCA and NLEA. See Sherman Food Drug and Cosmetic Laws, Cal. Health & Safety Code § 109875 et seq. Other than California, Illinois, New York and New Jersey now have similar statutes adopting the FDCA and its amendments. Unlike federal law, these state statutes provide for a private right of action. (Illinois – 410 ILCS 620/1 et seq.; New York – N.Y. Gen. Bus. Law § 350; New Jersey –N.J.S.A. § 56:8-1 et seq.) This development in the law is often used as a vehicle for plaintiffs' attorneys to creatively expand jurisdiction, and assert a private right of action under state consumer fraud statutes and the state labeling statutes for a violation of the federal nutrition labeling requirements.

In one such California case, Reid v. Johnson & Johnson, 780 F.3d 952 (9th Cir. 2015), the US Court of Appeals for the Ninth Circuit reversed the district court's dismissal of the plaintiff's false advertising lawsuit against the manufacturers of Benecol, a vegetable oil-based butter substitute. The district court dismissed the case, holding that federal law preempted the state action. The plaintiff alleged that the defendant misled consumers by claiming the product contained "No Trans Fat," on its packaging, when in fact Benecol does contain trans fat. Defendants argued that the plaintiff's claim, based on California state law, was preempted by the NLEA, which allows "insignificant" amounts of trans fat to be labeled as zero grams. The district court agreed. The appellate court, however, rejected the district court's preemption ruling and held that the plaintiff's claims amounted to a violation of the FDA's regulation on "nutrient content claims." While a declaration of trans fat content information is not required by the FDA if a product contains less than 0.5 grams of total fat in a serving, by asserting the product contained "No Trans Fat," the defendants made a nutrient content claim about their product. Because the nutrient content claim was misleading under FDA regulations, plaintiff's state law claim that Benecol's packaging misled consumers was allowed to proceed.

Similarly, in McMahon v. Bumble Bee Foods LLC, 2015 WL 7755428 (N.D. Ill. 2015), the plaintiff brought a state law claim under the Illinois Food, Drug and Cosmetic Act (IFDCA) for alleged violations of FDA regulations. The plaintiff claimed that labeling on defendant Bumble Bee's products claiming that the products were an "Excellent Source [of] Omega-3" violated the FDA's regulations. While the FDA had yet to implement standards that described what amounted to a high level of Omega-3, it still required any manufacturer wishing to make an Omega-3 claim to submit an application before doing so. Defendant did not file an application, and this amounted to an alleged failure to comply with FDA regulations. Despite defendant's claim that the IFDCA was preempted by the FDCA, the court allowed plaintiff's lawsuit to proceed with a deceptive business practices claim based on a violation of the IFDCA. Noting that the IFDCA directly tracks the requirements of the FDCA, and that plaintiff's claim was based on a violation of existing federal regulations, the court held that the plaintiff had a private right of action under Illinois state law, as preemption did not apply.

New York and New Jersey have similar statutes to allow private rights of action for violations of FDA regulations. See Ackerman v. Coca-Cola Co., 2010 WL 2925955 (E.D.N.Y. July 21, 2010) (denying defendants' motion to dismiss New York state law claims based on a violation of FDA regulations involving implied nutrient content claims); Stewart v. Smart Balance, Inc., 2012 WL 4168584 (D.N.J. June 26, 2012) (denying defendants' motion to dismiss New Jersey state law claims alleging improper nutrient content claim under FDA regulations).

We expect to see more consumer fraud claims based on the violation of state labeling statutes given that courts are increasingly finding a private right of action under state law concerning the FDA's labeling requirements.

Elizabeth Rowe, former McDermott summer associate, also contributed to this On the Subject.

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