YOUR SOURCE ON FOOD LITIGATION AND REGULATION

In the last few years, food and beverage companies have been defending against a new trend of claims related not to the products they manufacture, but the packages in which the products are sold. Recently filed class action complaints allege that food and beverage manufacturers are reducing the amount of product inside opaque containers but not reducing the size of the containers, or that the manufacturers do not adequately fill the containers. Classic examples include bags of chips or boxes of rice with extra container space that is only visible once the package is open.

This extra space is known as “slack-fill.” The US Food and Drug Administration (FDA) defines slack-fill as the difference between the actual capacity of a container and the volume of the product contained therein. 21 C.F.R. § 100.100. Under the FDA’s regulations, a “container that does not allow the consumer to fully view its contents shall be considered to be filled as to be misleading if it contains nonfunctional slack-fill.” Id. The FDA recognizes that some slack-fill does have a purpose. Thus, functional slack-fill, such as the extra space that is intended to help protect the contents of the package or that is the result of unavoidable product settling, is exempt from the FDA’s regulations. See id. The State of California also prohibits nonfunctional slack-fill in food packaging, but defines “nonfunctional slack-fill” as the empty space in a package that is filled to “substantially” less than its capacity. Cal. Bus. & Prof. Code §§ 12606, 12606.2.

In a decision that will impact numerous lawsuits in the lower courts, in Kane v. Chobani (No. 14-15670 (9th Cir. Mar. 24, 2016)) the US Court of Appeals for the Ninth Circuit stayed proceedings in a class action regarding the alleged misuse of the term “natural” on food labels until the US Food and Drug Administration (FDA) has completed its review of the term.

Background

The case arises from Chobani’s use of the terms “only natural ingredients” and “all natural” on the labels of its yogurt products. Plaintiffs originally brought suit in the Northern District of California (see Kane, et al v. Chobani, LLC, No. 5:12-cv-02425-LHK (N.D. Cal.)) claiming, among other things, that characterizing the yogurt as “natural” was misleading because the product included color additives that were not natural, and the fruit and vegetable juices in the product “were highly processed unnatural substances.” To establish standing, a plaintiff must prove actual reliance on the defendant’s misrepresentations—here, that the plaintiff purchased the Chobani yogurt that he or she otherwise would not have purchased (or would not have spent as much money on) in reliance on the fact that the yogurt was “natural.” The lower court dismissed the case on the ground that plaintiffs failed to plead sufficient reliance on the term.

On February 26, two cheese companies and one of their corporate officers, Michelle Myrter, pleaded guilty in federal court for selling “real parmesan and romano cheese” that contained high amounts of cellulose and other improper fillers. The companies, Universal Cheese & Drying Inc. and International Packing LLC, each pleaded guilty in federal court to one count of conspiring to introduce misbranded and adulterated cheese products into interstate commerce and to commit money laundering. Each company also forfeited to the United States $500,000.1 Myrter pleaded guilty as a responsible corporate officer to one misdemeanor count of aiding and abetting. She faces up to one year in prison and/or a $100,000 fine.

The recipe for parmesan and romano cheeses are standardized (also called a product’s “standard of identity”) and regulated by the US Food and Drug Administration (FDA). The investigation into the two cheese companies was instigated after a fired plant manager tipped off the FDA that the companies’ cheeses contained improper fillers. The US Department of Justice (DOJ) alleged that Myrter and the companies knew that the cheese they sold did not meet the standards of identity for parmesan and romano cheese, but they nevertheless marked the products as real parmesan and romano cheese. Notably, the DOJ acknowledged that the adulterated products never posed a threat to the health or safety of consumers.

On February 23, the US Food and Drug Administration (FDA) issued a guidance document titled Guidance for Industry: Nutrient Content Claims; Alpha-Linolenic Acid (ALA), Eicosapentaenoic Acid (EPA), and Docosahexaenoic Acid (DHA) Omega-3 Fatty Acids; Small Entity Compliance Guide1 (Guidance). The Guidance was issued pursuant to the Final Rule regarding omega-3 nutrient content claims issued in 2014, which took effect on January 1, 2016.2 Thus, this Guidance was issued after the compliance date. The Final Rule was issued in response to three notifications from seafood and fish oil producers that wished to make nutrient content claims for ALA, DHA, and EPA on their product labels. Specifically, two of the producers manufactured fish oil–based dietary supplements.

The Guidance clarifies food producers’ responsibilities with regard to ALA, EPA, and DHA nutrient content claims and prohibits certain claims. The prohibition on certain claims has wide implications for foods that previously made DHA, EPA, and certain ALA claims. Possible products affected include seafood, eggs, pasta, dairy products, juices, baby food, cooking oil, certain meats, and fat-based spreads.

Nutrient Content Claims Generally
Nutrient content claims are labeling claims that characterize the level of a nutrient in a food. The Food, Drug, and Cosmetic Act (FD&C Act) requires that companies notify FDA of a nutrient content claim at least 120 days before a food that bears the claim is introduced into interstate commerce. Among other requirements, nutrient content claims must 1) be based on an authoritative statement that identifies a nutrient level to which the claims refer and 2) be stated in a manner in which the public can understand the relative significance of the nutrient in the context of daily diet. In the Final Rule, FDA prohibited the claims set forth in the notifications for DHA and EPA and some ALA claims because they did not meet these requirements.

On November 17, the Department of Justice (DOJ) issued a press release announcing that it and other federal agencies have slapped more than 100 makers and marketers of dietary supplements with civil and criminal cases over the last year. The press release highlighted a criminal indictment that was recently unsealed in which the DOJ accused a supplement manufacturer and many of its officers of violating the Food, Drug, and Cosmetic Act (FDCA) as well as committing federal wire fraud, obstruction, and conspiracy. According to the indictment, the defendants allegedly made false statements to the public and the FDA about certain imported ingredients, used falsified certificates of analysis for phony “plant-based” ingredients manufactured by Chinese chemical suppliers, and surreptitiously continued distributing a dietary supplement, even after learning that it could lead to serious liver damage.

Although the criminal indictment represents an extreme set of alleged facts, the DOJ’s press release sends a strong message that the agency intends to sweep far and wide. In addition to featuring a criminal prosecution, the press release also highlights civil actions brought by the DOJ and Federal Trade Commission (FTC) involving the FDA, the Department of Defense, the Internal Revenue Service, the US Postal Inspection Service, and the US Anti-Doping Agency. Many civil cases filed by the DOJ and FTC (some of which date back to November 2014) target less extreme conduct, including alleged misbranding due to claims about products’ intended uses and alleged Current Good Manufacturing Practice issues. The DOJ’s press release signals proactive and coordinated enforcement in the area of dietary supplements and an intent to investigate and prosecute manufacturers and retailers alike.

Read the full press release.

The food industry has become a fertile ground for class-action lawsuits over the last few years and shows no signs of slowing down. New cases are decided daily. There are several factors that drive this trend and that are likely to propel forward new cases in the coming years. As a detailed review of some of the cases in this area reveals, these factors make it probable that litigation in this area is likely to continue, even if not at the same rate that it has over the last couple of years.

In the white paper titled “Appetite for Litigation: Why Plaintiffs’ Lawyers Hunger for Food-Labeling Lawsuits,” partner Tom Sullivan provides an overview of federal statutes and regulations, outlines the different types of cases, summarizes the recent court trends and defenses to food-labeling litigation, and forecasts the emerging trends in the industry.

Read the white paper in full.

On November 6, 2015, the Food and Drug Administration (FDA) issued long-awaited guidance on its fortification policy for adding nutrients to foods in the form of a Questions and Answers Guidance for Industry. The FDA originally issued the fortification policy more than 30 years ago, in 1980, to “promote the rational addition of nutrients to foods in order to preserve a balance of nutrients in the diet of American consumers.” The fortification policy was then amended in 1993 to conform to the Reference Daily Intakes and Reference Daily Values issued by the FDA. However, this new announcement is the first time since 1980 that the FDA has provided guidance specifically on the fortification policy. The underlying principle of the fortification guidelines is to provide a uniform nutritional benefit to consumers without misleading consumers to believe that the fortified food will provide a complete and nutritionally sound diet.

The policy provides guidance on how to properly fortify food with vitamins and minerals, so as to avoid indiscriminate fortification of foods. For example, the FDA has issued Warning Letters stating that it is inappropriate to fortify snack foods and carbonated beverages. Additionally, the new guidance states that fortification of snack foods, including unsweetened carbonated beverages and low-calorie and calorie-free snack foods, “could mislead consumers to believe that substitution of naturally nutrient dense foods with fortified snack foods would ensure a nutritionally adequate diet.” For the same reason, FDA states it is inappropriate to fortify alcoholic beverages.

On New Year’s Eve, the USDA’s (Department’s) Food Safety and Inspection Service (FSIS) released its final rule requiring meat and poultry processors to include added solutions in their product labeling.

FSIS issued the added solutions proposed rule on July 27, 2011, in response to petitions calling on the Department to address the notion that some product labels may not clearly and conspicuously identify that the raw meat or poultry products contain added solution.

The original petitions were driven by competitive disagreements within the poultry industry. More specifically, the petitioners originally asserted that some companies were marketing fresh chicken items extended with broth in a manner that confused such products with traditional single-ingredient products. Nevertheless, FSIS extended the scope of both the proposed and final rules to encompass the broader range of meat and poultry products within its jurisdiction. In doing so, FSIS chose to more formally codify a number of longstanding labeling precedents and guidance within this area.

Like the broader federal inspection program in which it is housed, the Food Safety and Inspection Service’s (FSIS’s) prior labeling approval system continues to evolve away from its history of extensive command and control. There is evidence now that, at least in some cases, the agency wants regulated companies themselves to clarify their label claims, rather than making those calls itself.

FSIS’s recent finalization and implementation of new rules for the so-called generic approval for labels is perhaps the agency’s final step in transitioning from a system that, some 30 years ago, essentially insisted on the review and approval of every single label and labeling change associated with all products within its inspection jurisdiction to a far more carefully targeted program. The final rule took effect on January 6, 2014.

Vermont’s Office of Attorney General recently released its draft rule detailing how manufacturers and retailers could be required to label genetically modified organism–processed (GMO-processed) food sold in the state. The draft rule is expansive and will affect several sectors of the food industry, including producers, processors, distributors, and retailers. Significantly, Vermont’s GMO rule could serve as a model for future regulation by other states with GMO legislation and even the federal government.

This rule will place significant burdens on retailers and manufacturers to understand the composition of source ingredients. Vermont’s Act 120 defines “genetic engineering” as a process by which food is produced from organisms that are changed through the application of in vitro acid or hybridization techniques that do not occur by natural manipulation. Food products manufactured through “genetic engineering” and/or that contain GMO components must be labeled as such. The proposed rule is intended to clarify this mandate and provides that products produced with GMOs must be labeled by retailers and manufacturers as “Produced with Genetic Engineering.” In certain instances, retailers and manufacturers may label products as “Partially Produced with Genetic Engineering” (when the item is composed of less than 75% GMO material) or “May be Produced with Genetic Engineering” (when the seller does not know whether the food itself is genetically modified or contains items produced with GMOs). No label is required when 0.9% of the product’s total weight consists of items produced with GMOs.