Tort team attack Big Food

In 2009, a group of parents filed a class action lawsuit with the potential to bring Big Food down to its knees. The parents had taken issue with an ad campaign that tried to pass off Nutella – the chocolate and nut paste – as a healthy breakfast staple, citing the wholesome ingredients used to make the ‘hazelnut spread’. They argued that while hazelnuts, skimmed milk and healthy cocoa were indeed used in the preparation of Nutella, the spread also contained as much as 21 grams of sugar and 11 grams of fat, 3.5g of which are saturated, in every two-tablespoon serving.

In the advert a mother feeds her children breakfast, suggesting Nutella is best served on ‘multi-grain toast, or even whole-wheat waffles’. Ferrero USA, the makers of Nutella, settled out of court for $3m, and the advert was ordered off the air. Though $3m might not seem a huge blow for Ferrero, a group whose global turnover in 2011 was €7.22bn, the lawsuit set a precedent.

Big Food has been in the sights of class action litigation lawyers for a long time. Americans have been trying, and often failing, to sue unhealthy food producers fairly regularly for the past decade.

Food for thought
At first, lawsuits were brought that tried to place responsibility for health issues at the doorstep of the food producers, but this did not work; judges ruled it the consumer’s responsibility for buying and eating these foods. So the litigators turned their attention to the issue of labelling. If the responsibility for eating unhealthily lies with the consumer, then they must be provided with fair and accurate information about the products they are buying. But for every ‘Nutella suit’ there was at least one unsuccessful one. For instance: in 2009, a California judge dismissed a false advertisement lawsuit against PepsiCo, the makers of Cap’n Crunch Berries, because “a reasonable consumer would not be deceived into believing that the product in question contained a fruit (‘crunchberries’) that does not exist.”

But now a group of accomplished class action litigation lawyers in America have joined forces to file 25 separate lawsuits against a clutch of some of the country’s biggest food manufacturers. And at the centre of these lawsuits is, once again, labelling and advertising. The companies being served this time are Big Food hotshots PepsiCo, ConAgra, Heinz and General Mills, among others. The suits have been been filed quietly over four months, and centre on the notion that food makers are misleading consumers and breaching federal regulations with their labelling.

President and CEO of Heinz William R Johnson

But the new cases are being pushed aggressively through court in an unprecedented way; in California, the lawyers are asking a federal court to order the suspension of sales of ConAgra’s Pam cooking spray, Swiss Miss chocolate drinks and Hunt’s canned tomatoes for the duration of the trials. “It’s a crime – and that makes it a crime to sell it,” said Don Barrett, one of the leading plaintiffs’ lawyers in the case, referring to the alleged misleading labels. “That means these products should be taken off the shelves.”

One of the main issues in contention is how companies are labelling the ingredients in
their products. One of the lawsuits has been brought against yoghurt manufacturer Chobani, which allegedly lists one of its products as ‘evaporated cane juice’. According to the suit, the FDA has repeatedly warned companies about using euphemisms on ingredient lists; to them ‘evaporated cane juice’ is nothing more than sugar.

That charges also relates to Pam cooking spray, manufactured by ConAgra. One of the components, listed simply as ‘propellant’, was allegedly found by a plaintiff to be a combination of propane, butane and other gases. Butane is a popular lighter fuel; propane is used as a car fuel and in refrigeration. This information was found listed in the materials data safety sheet that the manufacturer must file separately with the FDA, according to the plaintiff, and completely inaccessible to the average consumer.

If the lawsuits are successful, it could open the gates for changes in federal legislation. Class action litigation has always been a way for people to challenge unfair treatment by companies or corporations, to complain about defective products or unfair treatment.
The 1954 decision that desegregated American schools and educational institutions was a class action suit – Brown v. Board of Education. In the 1980s, countless suits were filed against asbestos companies. Class action suits are often brought to protect people’s rights, but sometimes that comes in detriment to the wellbeing of businesses.

Class action settlements can be extremely expensive, even more so when cases go to trial and payments are ordered by court judges. Often, defendants are forced to make changes to their procedures or policies in order to avoid future lawsuits, and this can often compromise the bottom line. And while bigger companies or industries could probably cope with such changes, smaller ones might not be able to afford it. Further, although many class action lawsuits are aimed at only one company, others in the same line of business, or employing similar practices, often choose to adapt as well, in lieu of also facing potentially lethal litigation.

Dangerous precedents
Don Barrett, a tort lawyer from Mississippi, is the most prominent in the group of attorneys behind the recent wave of class action litigation being filed against food companies. Among his many previous accolades, Barrett has one particularly poignant victory under his belt: he was one of the men behind the first major lawsuit won over the tobacco industry. Together with two other tort lawyers and one district attorney, Barrett concocted the lawsuit that eventually became the Tobacco Master Settlement Agreement (TMSA). It was the first of its kind to challenge Big Tobacco – Philip Morris, RJ Reynolds, Brown and Williamson and Lorillard – with the cost of healthcare the state was burdened with as its citizens developed conditions associated with smoking cigarettes. Mississippi was first to file suit, but eventually all 50 states of the Union, plus the Districts of Columbia, Puerto Rico and the American Virgin Islands, each represented by its respective attorney general, all brought similar cases. After a decade, Big Tobacco settled in 2008 for $206bn, payable over 25 years.

The lawsuit was groundbreaking for a number of reasons. It was the first significant victory against Big Tobacco in the US, and for that it paved the way for individual plaintiffs to pursue cases that might have been dismissed or lost previously. By finding Big Tobacco responsible for the cost of the medical care accrued by smokers, courts indirectly established a causality between smoking and disease, a relationship that had been dismissed by most judges and juries before, in favour of the argument that smokers were ‘personally responsible’ for their own choice to smoke.

But another key feature of the Big Tobacco mass settlement agreement, and one that is likely to be emulated somewhat in the Big Food class action suite of suits, is that the terms of the settlement were in no way restricted to the payment of damages, settlements and lawyer fees, but included a comprehensive set of restrictions on everything from advertising to education initiatives. The TMSA forced Big Tobacco to restrict its advertising – including sponsorship, lobbying, and litigation activities, with particular emphasis on actions targeting young people. The companies were also to disband a cluster of three ‘tobacco-related organisations’ and to restrict their participation in any trade organisations. The settlement also demanded the creation of the National Public Education Foundation − an organisation dedicated to eradicating underage smoking and
preventing smoking-related diseases.

The tobacco industry today is very different to what it was 10 years ago, at least in part thanks to the limitations imposed by the TMSA. It is difficult to foresee what kind of changes mass litigation will have on the food industry. It is already carefully regulated by the FDA.

Foods that claim to be ‘organic’ on any labelling must have been previously certified by the National Organic Program and must have been produced from at least 95 percent of ingredients “free from artificial colours, flavours, sweeteners, preservatives and ingredients that do not occur naturally in the food; meat and poultry must be minimally processed in a method that does not fundamentally alter the raw product”, according to the FDA, and all of this must have been approved on a case-by-case basis by the National Organic Program.

By finding Big Tobacco responsible for the cost of the medical care accrued by smokers, courts indirectly established a causality between smoking and disease

But there are no standards for foods labelled ‘healthy’ and, despite guidelines, the word ‘natural’ is still allowed. The FDA is also lax on the labelling of trace ingredients, citing only that “it depends on whether the trace ingredient is present in a significant amount and has a function in the finished food; if a substance is an incidental additive and has no function or technical effect in the finished product, then it need not be declared on the label.”

The group of lawyers involved in the new litigation claims to have been researching these labelling rules and regulations for two years before actually filing suit, which, if this is true, would mean that there could be trouble brewing in the horizon for the food manufacturers that have been served.

Cooking up a storm
Another key factor in the suits is the jurisdiction in which they were filed. The plaintiffs’ lawyers were careful to select states with robust consumer-protection legislation such as California and New Jersey. These choices will not only be fundamental in the outcome of the trial but will also determine the amount of damages defendants can be liable for.

For instance, New Jersey has a six-year statute of limitations on cases like these, which means that plaintiffs can ask to recover years of revenue from the sale of any products found to be mislabelled. Food companies have refuted any accusations, and have stood behind their practices. A Chobani representative said that the lawsuits are “frivolous” and “without merit”. “We have built our brand around being transparent and very connected to the marketplace,” said Nicki Briggs. But not all observers agree.

“It’s a real wake-up call for companies and in-house counsel because of the cost that can be associated with these cases long term,” says American attorney Kristen Polovoy in the Corporate Council journal. She cites the extremely high costs of defending a lawsuit like this, combined with attorney fees, damages, plus any potential costs that come with changing labels, advert campaigns and even production practices. “It can be staggering for a company.”

Povoloy believes that there are a number of products that have a particularly high risk of being served, notably ones with labels claiming health benefits, or that use words like ‘natural’ or ‘pure’. “Such wording puts itself on the radar screen as a class action target,” she said.

In increasingly health-conscious times, people are aware of labelling and concerned with what they are eating. Between 1990 and 2010, sales of ‘organic’ food have increased from $1bn per year to $26.7bn, according to the Organic Trade Association. The market for foods perceived as healthier is growing fast; the health foods market was worth $143bn in 2010 according to the Healthy Foods Report, an increase of 1.8 percent from the previous year, despite the difficult economic climate and high unemployment facing the US.

“People want to put good, healthy, nutritious food in their bodies,” said Keith M Fleischman, one of the plaintiffs’ lawyers involved in the suits. “They are very aware of what’s on labels.”

Some observers, noting the huge pay cheques being cashed by plaintiffs’ lawyers and the meagre compensation earned by each plaintiff – for the Nutella case, each household was allowed to claim the expenses of up to five jars of the spread, or the equivalent of $20 – are questioning the motives behind these new lawsuits. Should the cases be ruled in favour of the plaintiffs it will not only potentially cost billions of dollars in settlement and lawyers fees for the offending companies, it could also make the food industry reassess their marketing business model.

If the responsibility for eating unhealthily lies with the consumer, then they must be provided with fair and accurate information about the products they are buying

The repercussions could be favourable for consumers who will have access to clearer information about the products they are consuming. Barrett insists that the lawsuits are about doing right by the consumers and getting food companies to accept responsibility about their role in the nation’s noxious eating habits. But American tort lawyers are in the habit of charging around 25 percent of winnings and settlements, making the lawsuits against Big Food one potentially very fat cash cow.

But it could be years before any settlement is reached and even longer if the cases go to trial and through the long chains of appeal; the TMSA, for instance, lasted over 10 years. And though the plaintiffs’ lawyers might be competent and well-prepared, they are still tasked with convincing a judge and jury that the food manufacturers knowingly deceived consumers for their own gain; tort law dictates that one person’s (or corporation’s) behaviour has unfairly caused someone else to suffer loss or harm, and that might be the tricky one to prove.

The plaintiff’s lawyers are aware that food companies will defend themselves by pointing out that the lawsuits have no actual victims, and plaintiffs might have been consuming the allegedly mislabelled products for years without major repercussions. “Food companies will argue that these are harmless crimes – the tobacco companies said the same thing,” Barrett said. “But to diabetics and some other people, sugar is just as deadly as poison.”

Tort law is not exclusive to the US and neither are class action suits, but the billionaire settlements certainly are characteristic of that jurisdiction. The EU and the UK for instance, have far stricter and clearer food labelling policies, and a much more restrained relationship with class action lawsuits. But the outcome of the cases will undoubtedly change the way we think about and consume processed foods, and affect the industry the world over.


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