Big Servings of Class Action Litigation for Food Companies
Aug 20, 2012

Attorney Kristen Polovoy has three words for any food company counsel caught up in snowballing class action litigation over marketing and labeling: Take it seriously. And for those who haven’t been slapped by a suit yet, she added two more: Get smart.

 
Corporate Counsel
August 21, 2012

Attorney Kristen Polovoy has three words for any food company counsel caught up in snowballing class action litigation over marketing and labeling: Take it seriously. And for those who haven’t been slapped by a suit yet, she added two more: Get smart.

“In-house counsel need to be educated and stay educated on this issue, and work closely with marketing and ad departments before the first drop of ink hits the first product label,” said Polovoy, a class action defense lawyer in the New Jersey office of Montgomery, McCracken, Walker & Rhoads. “If you don’t do your homework in advance, you will probably regret it at great cost in the future.”

Polovoy was also quoted in a
Sunday New York Times article that identified the food industry as the favorite new target of class action plaintiffs. The article said more than a dozen plantiffs lawyers who once took on the tobacco companies have, of late, filed some 25 cases against food giants like ConAgra Foods, General Mills, Heinz, and more.

Polovoy tells CorpCounsel.com that’s because in consumer-friendly states like California and New Jersey, a plaintiff can win unlimited compensatory damages, mandatory treble damages, plus attorneys fees. “And there’s a six-year shelf life,” she said, referring to the states’ long statutes of limitations.

All of which means plaintiffs can ask to recover years of revenue from sales of mislabeled products.

The food companies have argued that most of the suits lack merit and are motivated by lawyers seeking big paydays.

But Stephen Gardner, director of litigation for the Center for Science in the Public Interest, disputed that. “We see a small number of opportunistic lawyers who are in fact only in it for the money,” he concedes. “But most are in it to get companies to make good changes.”

In fact, his nonprofit consumer advocacy group probably started the trend of suing food companies. He said CSPI scientists provide the knowledge, background, and experience that help plaintiffs prove their claims.

Last week
CSPI threatened to sue Welch Foods, Inc., for labeling its grape juice and other products as “heart healthy,” when in fact they are not, according to the group.

In a letter sent to CSPI and posted on its website, Welch's said CSPI "makes a number of misguided accusations regarding Welch's messaging." The letter cited several authorities to support its health messages, and said, "We go to great lengths to ensure that all our communications are truthful."

Also this month, CSPI filed or joined two more suits. The first is against Nature Valley for marketing its granola bars and “thins” as “natural,” even though they contain high-fructose corn syrup, high-maltose corn syrup, and other highly processed ingredients.

In the second, CSPI joined a California action against Splenda Essentials, a no-calorie sweetener artificial fortified with vitamins, antioxidants, or fiber. The suit alleges the product provides no health benefits and short-changes consumers who believe that it does.

Nature Valley parent General Mills, and Splenda did not immediately return calls for comment.

Gardner confirmed the growing trend of these food-company suits, saying he sees a new one filed almost every week, and on Monday alone he was involved in two conversations about other potential lawsuits.

“It’s health and financial fraud, and companies now have to be paranoid,” he said. “And they have reason to be, because we are in fact out to get them.”

Polovoy, the defense lawyer, pointed to a more health-conscious public as a reason for the spike in claims. “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,” she said.

Such costs can include the high price of defending a suit, attorneys fees, damages, as well as the expense of changing product labels and advertising campaigns, according to Polovoy. “It can be staggering to a company,” she noted.

Polovoy explained that high-risk products include those that offer unproven health benefits or carry labels such as “natural” or “pure.” Such wording puts itself on the radar screen as a class action target, she said.

She advised in-house counsel to examine “under a microscope” every word that will appear in an advertisement or on a label. Then ask yourself if you’re using language that is just puffery—like “the best hamburger”—or is it a false statement of fact about the product.

And one more caveat from Polovoy: even if a statement is literally true, it can still be actionable if it has the “capacity” to mislead consumers.

 
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