By D. Matthew Allen, Chris S. Coutroulis, and Robert L. Ciotti, Carlton Fields
The class action is a potentially potent vehicle for attempting to effect behavioral change, and plaintiffs' counsel have not been shy about using it creatively.
Nowhere is this more apparent than in the food industry context, where one of the hottest trends is the filing of class actions against manufacturers of food products on behalf of consumer classes claiming to have been deceived by product labeling.
For example, plaintiffs are challenging the labeling of snack crackers as “wholesome” or “healthy,” and juice and water drinks as “natural.” In the last two years alone, reported decisions reveal a wide variety of claims filed against an array of products and manufacturers:
Several lawsuits in this vein assert that a “natural” claim on product packaging or labeling is deceptive because the product contains ingredients from plants grown from genetically modified organisms (“GMOs”). Among the products challenged have been cereal, snack chips, juice beverages, and cooking oil.15
GMOs are plants that grow from seeds in which DNA splicing has been used to place genes from another source into the plant. The plaintiffs in these lawsuits typically allege that GMOs pose a potential threat to consumers because medical research and scientific studies ostensibly have yet to determine the long-term health effects of genetically engineered foods. Many of the complaints provide various purported examples of potential health threats based on studies or research conducted outside of the United States.
The non-profit organizations and individual plaintiffs bringing these claims are attempting, through the device of a class action lawsuit and the accompanying monetary and injunctive exposure to the company whose packaging and labeling is being challenged, to advance their conception of what the rules ought to be for the American food industry.
Plaintiffs bringing these cases have sued under such varied theories as: (a) violation of a state consumer protection or deceptive trade practices statute; (b) unjust enrichment; (c) negligent misrepresentation; (d) intentional misrepresentation; (e) fraudulent concealment; (f) breach of implied warranty of fitness for a particular purpose; (g) breach of express warranty; and (h) violation of the Magnuson-Moss Warranty Act. Many food product labeling claims are disposed of on motions to dismiss. However, state law consumer protection claims frequently survive motions directed to the face of the pleadings.16 That of course brings these cases to a critical point, which is the focus of this article:
Is the class action device the right and proper vehicle for GMO claims to play out? Can a class be certified? And should the rules for what disclosures are required effectively be established in the courts through the vehicle of class actions, with the attendant effects they have on companies who must balance risk and expense, rather than through the regulatory process?
As of the time of this writing, only a few food product labeling cases have advanced to the class certification stage, and none of them are GMO cases. This article explores how GMO cases in particular might fare on a motion for class certification. Based on the purpose and intent of the class action procedural device as applied to these kinds of cases, we conclude that, in general, GMO/natural cases are not well suited for class treatment, and that the class action device is not the proper vehicle for airing these issues. We therefore believe there are ample reasons for courts applying Rule 23 to refuse to certify these kinds of cases.
Genetic modification is a technique for plant breeding that selectively identifies and reinforces particular plant traits. Also known as “bioengineering,” it is a method that the U.S. Food and Drug Administration has, for decades, approved as a safe and effective means of crop production. As the FDA's 1992 Statement of Policy: Foods Derived From New Plant Varieties explains, the “FDA believes that the[se] new techniques [for genetically modifying plants] are extensions at the molecular level of traditional methods and will be used to achieve the same goals as pursued with traditional plant breeding.
The agency is not aware of any information showing that foods derived by these new methods differ from other foods in any meaningful or uniform way, or that as a class, foods developed by these new techniques present any different or greater safety concern than foods developed by traditional plant breeding.”17 The FDA has on several occasions reaffirmed its policy that for purposes of food labeling, there is no material difference between crops grown using bioengineered seeds and those grown using more traditional cross-breeding methods.18Indeed, it explained that because bioengineering techniques are “more precise [than traditional plant breeding methods,] they increase the potential for safe, better-characterized, and more predictable foods.”19
Accordingly, the USDA and FDA have allowed bioengineered foods to become the overwhelming bulk of corn and soy crops grown in this country. As the FDA has explained, “Most, if not all, cultivated food crops have been genetically modified.”20 USDA statistics show that 88% of corn and 93% of soy acreage were bioengineered in 2012. Thus, only food certified as organic is required to be grown from non-bioengineered seed and segregated from non-organic crops to minimize pollination from bioengineered crops.21
Most recently, President Obama signed into law section 735 of H.R. 933, the so-called “Farmer Assurance Provision,” which, as reported, directs the Secretary of Agriculture to grant temporary deregulation status to allow growers to continue cultivating bioengineered products that were previously approved while legal challenges to the approval process proceed.
Plaintiffs in the GMO lawsuits contend that bioengineered food is not “natural” as advertised. In 1993, the FDA noted that it had received a wide range of ideas for it to consider in developing a definition for “natural.” Because of “resource limitations and other agency priorities,” the FDA, however, refused to establish a rule defining the term “natural.”22 At the same time, the agency stated that it intends “to maintain its current policy … not to restrict the use of the term ‘natural’ except for added color, synthetic substances, and flavors.”
Additionally, it stated that it “will maintain its policy … regarding the use of ‘natural,’ as meaning that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.”23 Thus, in effect, despite its refusal to issue a rule, the FDA has made a policy determination that the term “natural” should be restricted only in a very limited fashion.
Notably, the GMO plaintiffs do not allege that food products containing GMOs contain artificial or synthetic substances, flavors, or color additives. Rather, their claim is that the presence of GMOs itself makes the products non-natural, and that under state consumer protection statutes, marketing such products as “natural” is contrary to the reasonable customer's expectation as to the meaning of that term. Yet given FDA pronouncements, a manufacturer of GMO products certainly should argue that the FDA effectively has created the only generally accepted meaning of the term “natural,” which is the FDA's definition that “nothing artificial or synthetic … has been included in, or has been added to, a food that would not normally be expected to be in the food.”24
When viewed in light of the regulatory backdrop outlined above, the question becomes whether a class should be certified based upon a GMO plaintiff's subjective opinion (if the plaintiff has an opinion at all) that the challenged products are not “natural” and should not be so labeled because they are made from the nation's routinely grown and consumed bioengineered crops.
As noted above, a handful of food product cases have advanced to the class certification stage.
Although none of them to-date involves a challenge to GMOs in products labeled as “natural,” the rationale in the decisions that have issued should illuminate how courts might treat class certification of these types of claims.
In addition, the unique regulatory framework of GMOs in food products bears on the certification analysis. We see the following trends flowing from the case law and the regulatory framework.
Most courts addressing proposed national classes reject the argument advanced by plaintiffs that the law of a single jurisdiction can apply to all class members' claims. Pursuant to choice of law principles, these courts typically hold that the law of the state in which each class member is a resident will apply to that class member's claims. This fact usually dooms a finding of predominance under Rule 23(b)(3).25 In food labeling cases, several courts have applied these principles to strike allegations or deny certification of a nationwide class.26
One California district judge has bucked this trend and certified a national class of consumers who purchased liquid dietary supplements, applying California law to all class members' claims.27 In its initial decision, the court explained that it felt free to apply California law to all class members' claims because it was the defendants' burden to show that there were material differences between California consumer protection laws and the consumer protection laws of other states rather than, as other courts had done, the plaintiff's burden to show the absence of such differences. The court found that defendants' reliance on statements in other cases indicating material differences among state laws was insufficient because the defendants had the burden of showing an actual conflict “on the facts of this case.”28
After the Ninth Circuit vacated a nationwide class in Mazza v. Am. Honda Motor Co.,29 the defendant moved for reconsideration. The court refused to reconsider its prior decision, reasoning that “Defendants' briefing in the prior motion differs from that of the defendants in Mazza.” The court's shifting of the burden of demonstrating that California law differs from that of other states is contrary to the prevailing standard on class certification. This decision is a wrongly-decided outlier.
Many plaintiffs readily understand the difficulties of certifying a national class in a food products case and, therefore, limit their proposed classes to residents of the forum state. Even in such a context, however, if the challenged labeling was not uniformly made across all challenged products or over the entire class period, certification of a statewide class should be denied.
Red v. Kraft Foods30 is illustrative. There, the plaintiffs alleged that certain claims made by Kraft on its cracker products regarding their healthfulness—for example, that they were “wholesome,” that they support ‘kids' growth and development,” and that they were smart choices”—were deceptive because the products contained trans fats. Plaintiffs sought to certify a class under several California state consumer protection statutes.
The court held, however, that the class was not adequately defined and was overbroad because, for large parts of the class period, most of the challenged statements did not appear on any packaging or advertisements. Moreover, even when they did appear, they were used in only some versions of that particular snack.
Although the plaintiffs sought to redefine the class to exclude some of the challenged products, the court ruled that it was still too broad to the extent that it necessarily included customers that were not exposed to allegedly misleading statements. In addition, the court held that the plaintiffs failed the Rule 23(a)(2) commonality requirement because the proposed class consisted of millions of consumers who purchased different products bearing different labels over the span of a decade.31
In some jurisdictions, food labeling classes cannot be certified because the plaintiff cannot uniformly show that all class members suffered injury or loss. For example, if the named plaintiff did not pay a premium for the product, he or she may fail to establish the Rule 23(a) requirements of typicality and adequacy.
In addition, though individual damages calculations will not necessarily defeat class certification, this depends on the calculations being straightforward such that they can be performed by a common methodology applicable to each class member. Particularly in consumer transactions where there often are no records reflecting individual consumer purchases, damages may well be individualized. The price paid by each consumer may vary from store to store, from customer to customer (as a result of coupons, loyalty programs, and other promotions), or according to when the purchase was made. Where each putative class member paid a different amount and bought different quantities on numerous occasions over a period of time, the individual inquiries necessary to compute individual damages may well predominate over any possible common questions relating to liability.
Courts sometimes certify classes in non-GMO food product cases over defendants' objections that consumers had different reasons for purchasing the products and many of the class members did not rely on the allegedly misleading statements.32 This type of argument by defendants may be rejected even if the court denies class certification (as occurred in Red v. Kraft). This is because many states, including California where many of the food product cases are filed, hold that individual reliance is not a requirement of their consumer protection statutes as long as the alleged misrepresentation was material. In other words, reliance is deemed satisfied if it can be determined that a reasonable class member would likely be deceived by the product labeling claim.33Nonetheless, as discussed above, the plaintiffs must demonstrate common exposure to the misrepresentation (not just the product) to obtain class certification.34
Cases permitting a presumption or inference of reliance appear to be predicated upon the assumption that there is a single “reasonable” class member viewpoint as to whether the alleged misrepresentation is material. The court in Guido, for example, called the presumption an “objective” standard.35
The issue of reasonable reliance in the GMO context appears to be fundamentally different. Given the regulatory framework discussed above, it is evident that there is no common consumer understanding of what “natural” means, and accordingly no presumption of reliance is warranted. In fact, products developed from bioengineered crops are indeed “natural” in any reasonable meaning of that term because a very high percentage of many U.S. crops, including soy and corn, are produced using GMOs.
The FDA has considered, but chosen not to adopt, labeling standards for “natural” products or products using GMOs. The FDA apparently has prohibited the use only of the term “organic” when GMOs are involved, but this involves a very different issue from whether they are “natural.”
While the FDA has chosen not to adopt mandatory labeling requirements, it issued a “guidance” for producers who voluntarily choose to include information about bioengineered crops or products in their product information. In its Guidance for Industry: Voluntary Labeling Indicating Whether Foods Have Or Have Not Been Developed Using Bioengineering,” issued January 2001 (not having the force of a regulation), the FDA noted that “Data indicate that consumers do not have a good understanding that essentially all food crops have been genetically modified and that bioengineering technology is only one of a number of technologies used to genetically modify crops.”
In other words, the FDA considered whether to adopt mandatory regulations for the use of “natural” in labeling foods containing GMOs, and did not do so, choosing instead only to issue non-binding guidance for companies who elected to include information about GMOs in their product. As noted, the FDA instead has issued a limited “policy” defining natural as “meaning that nothing artificial or synthetic (including color additives … ) has been included. … ” which does not reach bioengineered crops.
In this context, a food manufacturer has strong substantive arguments that the FDA pronouncements militate in favor of judgment against the plaintiff because the plaintiff cannot show—in the face of the FDA policy—that the label of the product is deceptive or misleading. Beyond this, or perhaps, in light of it, for class certification purposes, the defendant also should argue that there is no single “reasonable” consumer understanding that products containing GMOs are not “natural.”
Indeed, as the FDA commentary establishes, there simply is no common understanding among consumers of what GMOs are, what bioengineered crops are, or what “natural” means in that specific context. This suggests that it is not possible to establish that the defendants' labels are misleading or deceptive across a broad class of consumers whose common characteristic merely is that they bought the defendants' products.
Relatedly, even setting aside the issue of reliance, the issues concerning the lack of a clear meaning of “natural” in the context of bioengineered food ingredients may well implicate the threshold issue of whether the statements appearing on the product packages are “deceptive” as to each class member in the first place.
Wide variations almost certainly exist among purchasers as to what they think (if anything) “natural” means in the GMO context. This presents both substantive (whether the package was deceptive for that consumer), and class issues (varying, or no, individual perceptions of “natural” in this context among class members).
Many of these arguments were previewed—and not adjudicated—in Silber v. Barbara's Bakery,36 where the plaintiffs sought a preliminary injunction against a cereal manufacturer's labeling practices. The plaintiffs alleged that the defendant's Puffins cereal products were deceptively labeled when the packaging touted the product as “all natural” and “100% Natural” when it contained corn grown from genetically modified seed. In favor of their likelihood of success on the merits, the plaintiffs argued that the term “natural” had been partially defined by the FDA in its 1993 pronouncement. The defendant responded that the FDA had plainly stated that the term “natural” has no defined meaning.
The plaintiffs also contended that consumers expect “natural” food to be free of genetically engineered ingredients, citing a Hartman Group study and anecdotal evidence of consumer indignation. They also asserted that products derived from GMOs are unnatural by definition. The court refused to grant the preliminary injunction because the plaintiffs had failed to demonstrate irreparable harm and their claimed money damages provided an adequate legal remedy. Influencing the court's decision was a reluctance to order what amounted to a product recall to remedy the payment of a small premium for the product.
The court also noted that, since 2011, efforts to require labeling of GMOs had been rejected by legislators in more than a dozen states. It declined to “render a decision to compensate Plaintiffs for various state legislatures' failure to act.”37 The same could be said of the FDA's decision not to adopt such regulations.
Manufacturer defendants also should argue that GMO lawsuits are potentially vulnerable as class actions because they improperly seek to use the Rule 23 procedural device to have the judiciary establish for all consumers, in one single lawsuit, what the term “Natural” or “100% Natural” means in food products created from crops using GMOs when other means of doing so (or determining that there is no basis to do so) are superior to the class action vehicle.
Indeed, because of the absence of any scientific evidence that such crops are unsafe or otherwise materially different from foods produced without using such crops, the FDA has determined that producers of such foods need not “disclose” that they were created from crops using GMOs.
Plaintiffs in this new breed of class action seek to use the class device to end-around the FDA's rule-making. The Silber court hinted at such rationale in refusing to grant a preliminary injunction to recall or require a sticker on the label of Puffins cereal. The Northern District of California was more explicit in Cox v. Gruma Corp.,38when it became the first court to refer a putative GMO class action to the FDA for administrative determination of whether and under what circumstances food products containing ingredients produced using bioengineered seed may or may not be labeled “natural” or “all natural” or “100% natural.”
The issue of what constitutes a “natural” food product in the context of bioengineered crops used in food products is arguably a sufficiently “novel” issue that is inappropriate for class treatment. Defendants faced with food labeling class actions can develop strong thematic arguments that determining whether a food product labeled “100% natural” is deceptive and misleading because it contains products grown from GMOs involves a number of potential complex issues. The resolution of those issues via a class action is arguably not “superior to other available methods for adjudicating the controversy.”39
The very issue of what “natural” means is subject to debate, including policy debate, and can have varying meanings, or no particular meaning at all, for various consumers. Thus, the argument exists that there are other, better suited means, which would most obviously include regulatory means, for resolving these claims.
Plaintiffs bringing “natural” claims essentially want the courts to do what the FDA has to-date seen as not appropriate to do: to regulate the labeling of products containing GMOs.
Indeed, with the potential exposure a class action presents, allowing these cases to go past the class certification stage in the face of the Rule 23 problems they present could threaten to deter food manufacturers from defending them on the merits, thereby bringing about substantive labeling changes through the in terrorem effect of the suits themselves rather than a careful assessment of the underlying merits.
The GMO cases present a paradigm example where a rigorous Rule 23 assessment is appropriate to ensure that square pegs are not forced into round holes as plaintiffs elect to bypass the regulatory process in favor of a more potent formula to effect change.
Matt Allen, co-chair of Carlton Fields' Class Actions task force and general editor of the firm's blog “Classified,” practices in class action litigation. Robert “Bob” Ciotti practices in major commercial litigation, including private class actions. Chris Coutroulis, co-chair of Carlton Fields' Class Actions task force and chair of the firm's Litigation Council, also focuses on class actions.
The authors are available at firstname.lastname@example.org, email@example.com, and firstname.lastname@example.org, respectively.
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