One of the latest efforts by a municipality to address public health concerns by requiring warnings on certain products may be revived depending on the outcome of a recent rehearing before an 11-judge en banc panel of the Ninth Circuit. The en banc panel is reconsidering its 2017 decision blocking on First Amendment grounds a San Francisco ordinance that would require soda and other sugary drink sellers to provide a prominent health warning on billboard and other outdoor advertising. Continue Reading Ninth Circuit Reconsidering San Francisco Soda Health Warning

Certain restaurants, grocers, and other food establishments will soon be required to comply with the Food and Drug Administration’s (“FDA”) menu labeling rules. The FDA previously finalized menu labeling rules in connection with the Affordable Care Act to make calorie and nutritional information more available to consumers dining out. Last year, the FDA extended the compliance deadline to May 7, 2018. Continue Reading FDA Menu Labeling Rules Unfreeze

WebinarOn Wednesday, October 21 at 12:00 p.m. Central, Jay W. Connolly, Joseph J. Orzano and Kristine Argentine will present Seyfarth’s third installment of our 2015 Class Action Webinar Series. The presenters will discuss the current state of labeling class action litigation that has targeted food, beverage, nutrition and other industries in recent years. This webinar will provide an overview of the labeling class action landscape complete with discussion of the background giving rise to the wave of litigation and labeling claims commonly targeted by the plaintiffs’ bar. In addition, the panel will discuss the latest trends in pleading challenges, class certification, and settlements in the labeling context.

Specific topics will include:

  • Labeling Litigation Background:  How We Got Here
  • Hot Issues:  Common Marketing Claims Being Challenged
    • Organic
    • All Natural, “100% Natural,”  “Nothing Artificial” & Related Claims
    • Evaporate Cane Juice
    • Made In The USA/Place of Origin
    • Nutritional Content Disclosures/Upcoming Menu Requirements
    • “Healthy”
    • GMOs
  • How Courts Are Treating Challenges to Labeling Claims
    • Challenging the Complaint Up Front:  What Has Worked And What Hasn’t And Why
    • Challenging Attempts By Plaintiffs to Certify a Class:  Court Treatment of Certification Issues in the Labeling Context
  • Trends in Labeling Litigation Settlements

If you have any questions, please contact events@seyfarth.com.

*CLE Credit for this webinar has been awarded in the following states:  CA, IL, NJ and NY. CLE Credit is pending for GA, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

There is no cost to attend this program, however, registration is required. To register for this webinar, please click here.

 

On September 1, 2015, California enacted Senate Bill 633 (“SB 633”), loosening the state’s restrictions on “Made in USA” labeling.  Under existing law, codified at Cal. Bus. & Prof. Code § 17533.7, a product may not be sold or offered for sale in California as “Made in U.S.A” if the product, or any article, unit, or part of the product, has been entirely or substantially made, manufactured, or produced outside of the United States.  In other words, Section 17533.7 requires that a product—including each of its individual components (no matter how small)—be entirely or substantially made, manufactured, or produced domestically to qualify for use of a “Made in U.S.A.” or similar label.ca_capitol_modernrelics_creativecommons

SB 633, which goes into effect on January 1, 2016, amends Section 17533.7 to provide exemptions to the “Made in U.S.A.” labeling prohibitions if: (1) all the foreign components of the product constitute no more than 5% of the final wholesale value of the manufactured product; or (2) all the foreign components of the product constitute no more than 10% of the final wholesale value of the manufactured product, and the manufacturer of the product shows that it can neither produce the components in the United States, nor obtain the components from a domestic source.

SB 633 should come as a welcome relief to many companies doing business in California.  The bill more closely aligns California law with the less restrictive domestic content standards for use of the “Made in U.S.A.” designation in all other states and under federal law.  The amendment, therefore, should reduce the complications and costs faced by businesses selling products in California that are lawfully labeled as “Made in U.S.A.” in the rest of the country.

Similarly, because SB 633 effectively repeals California’s stricter—and unique—100% domestic sourcing requirements, companies may also be able to rely on the new law to dispose of pending lawsuits.  Under the “statutory repeal” rule, when a pending action rests solely on a statutory basis, and a final judgment has not been entered, the amendment or repeal of that statute without a savings clause will terminate all pending actions based on that statute.  Younger v. Superior Court, 21 Cal. 3d 102, 109 (1978); Callet v. Alioto, 210 Cal. 65, 67–68 (1930).  Because a claim alleging violations of Section 17533.7 is wholly dependent on that statute, companies litigating “Made in U.S.A.” claims may be able to argue that the enactment of SB 633 terminates those actions in which a final judgment has not been entered.

Regardless, the enactment of SB 633 should reduce the number of lawsuits brought in California against manufacturers or retailers over their “Made in U.S.A.” labeling of products containing negligible foreign content.  And for many companies doing business in California, such a prospect should elicit a sigh of relief.

“Shakedown Suits”

Although California’s passage of Proposition 64 made it more difficult for the plaintiffs’ bar to bring “shakedown suits” against the business community, we are witnessing a flood of false advertising class actions brought (or, more often, threatened) against consumer product manufacturers and retailers, who typically have no arbitration rights.  While some lawsuits are immediately filed, many plaintiffs’ firms serve demand letters under the California Consumers Legal Remedies Act (“CLRA”) threatening class actions that, historically, have been difficult to resolve expeditiously given their fact-intensive nature.  Facing the cost of defending such claims, many companies accept pre-filing offers to settle on an individual basis for purely economic reasons.  On September 25, 2013, however, the California Court of Appeal threw a lifeline to companies that refuse to pay such protection money.

The Court’s Opinion

In Simpson v. Kroger Corp., No. B242405, 2013 Cal. App. LEXIS 769, the complaint alleged that a “spreadable butter” product, which consists of butter mixed with canola or olive oil, was mislabeled and falsely marketed as “butter.”  On behalf of a putative class, the plaintiff alleged purported claims for unfair competition in violation of California Business and Professions Code Section 17200, false advertising in violation of California Business and Professions Code Section 17500, and violation of the CLRA.  After reviewing the packaging, which listed the product’s ingredients and otherwise disclosed what the product was, the trial court sustained a demurrer without leave to amend, finding that a reasonable consumer was not likely to be deceived.  Citing Day v. AT&T Corp., 63 Cal. App. 4th 325, 333, 74 Cal. Rptr. 2d 55 (1998), the Court of Appeal affirmed, confirming that courts “may be able to say as matter of law that contrary to the complaint’s allegations, members of the public were not likely to be deceived or misled . . . by packaging material.”

Implications

Although Simpson certainly does not guarantee the dismissal of every false advertising claim, it provides a potential early exit strategy at the pleading stage where it is clear from the factual circumstances that no reasonable consumer could have been misled.  It also reiterates the importance for companies to consider class action risk with respect to all decisions related to product labeling and advertising.