Will Trump Era Usher in More Consumer Suits?

Bloomberg Law’s combination of innovative analytics, research tools and practical guidance provides you with everything you need to be a successful litigator.

By Julie A. Steinberg

Nov. 22 — Will the Trump administration’s expected anti-regulatory stance usher in more consumer litigation, like fraud suits challenging food and other product labeling?

President-elect Donald Trump and a Republican Congress could scuttle a variety of consumer-related regulations, weaken regulatory enforcement or both.

Rollbacks might include a pending Food and Drug Administration regulation detailing how “added sugar” must be listed on the label, and FDA's weighing of possible regulatory action on the terms “healthy” and “natural.”

“I foresee that there is going to be a chilling of enforcement activity,” Maia Kats, litigation director for the Center for Science in the Public Interest, told Bloomberg BNA.

CSPI is a Washington-based consumer advocacy organization focused on health and nutrition issues.

When a void in government enforcement opens up, “a lot of that activity falls to groups like ours, but it also incentivizes the private plaintiffs’ lawyers to step forward to this space that’s unoccupied,” she said.

“I absolutely anticipate there’s going to be a lot more litigation,” she said.

Longtime food labeling attorney Stephen Gardner, head of the food law practice at The Stanley Law Group in Dallas, agreed.

“Nature and lawyers abhor a vacuum,” said Gardner, who’s been litigating food cases on behalf of consumers since the 1980s and is former litigation director at CSPI.

The natural tendency would be for state attorneys general and private lawyers to step in, if the Trump administration pulls back from pending or considered regulations meant to help consumers, Gardner said.

Does Regulatory Climate Impact Litigation?

But some attorneys who defend or represent businesses expressed differing views about the extent to which consumer suits, including those over food and other product advertising, are driven by the regulatory climate.

“First, an uptick in government enforcement has never meant fewer private suits/litigation, or vice versa. This is a myth fostered by the plaintiff’s bar, i.e., that private litigation fills voids left by under-staffed government enforcers,” William L. Stern of Morrison & Foerster in San Francisco told Bloomberg BNA.

“Private suits have always had their own momentum, sometimes tagging behind government enforcement/litigation (think VW emission litigation), but mostly not,” he said.

Stern, who specializes in the defense of consumer class actions, also said other factors sparked by the new administration could play a significant role in reducing, not increasing litigation. Those factors include increased resort to arbitration, and the appointment of pro-business judges who would continue trends such as tougher pleading requirements for plaintiffs.

David L. Wallace, another attorney who represents businesses in class actions, said the incoming administration is likely to target financial and pharmaceutical regulatory areas, which would leave consumer class actions largely unaffected.

But the litigation—especially suits challenging what's in food, and how it's handled—isn’t going away just now, Wallace, of Herbert Smith Freehills LLP in New York, told Bloomberg BNA.

Transparency: ‘A Phenomenon With Legs.'

Consumer class suits “will persist for the foreseeable future, unless FDA figures out how to cut the Gordian knot in terms of what descriptors like ‘natural’ and ‘healthy’ mean in the food context,” Wallace said.

The FDA recently sought public input on whether it should decide when and if food may be labeled “natural” and “healthy.”

“Absent that, regulation by litigation will remain the norm,” Wallace said.

But aside from how the agency proceeds, Wallace said, “the real driver of that litigation is not too little or too much regulation, but instead increasing pressure for greater transparency in relation to how consumer products are sourced, manufactured, and labeled.”

“That’s a phenomenon with legs,” he said.

Another business-side lawyer, Bruce A. Silverglade of Olsson Frank Weeda Terman Matz P.C. in Washington, said “deregulation on the federal level will lead to greater numbers of class action cases brought under state law, as activists look to alternative means to achieve their goals.”

However, one shouldn’t make assumptions about who’s on what side concerning regulation.

“In select cases, some segments of the food industry may actually want the federal government to set a level competitive playing field and regulate,” said Silverglade, whose practice includes FDA regulatory proposals, class actions and implementation of FDA nutrition labeling regulations.

“For example, there has been industry support for FDA to update its criteria for ‘healthy’ claims on food labels,” he said.

‘Natural' Suits Might Proceed

In the meantime, the new administration can’t take away the underlying basis for consumer suits.

False advertising claims are based on state laws, which can’t be altered by a Trump administration, CSPI's Kats said, adding that she doesn’t see California or New York amending their consumer protection laws. California is home to hundreds of food labeling suits.

Those markets “are so large that they really drive marketing in the rest of the country,” she said.

And Gardner, the other consumer attorney, said a regulatory vacuum could also unwittingly benefit consumers: It could defang arguments defendants often use to delay or get rid of litigation.

“If the Trump administration stops a regulatory action that might do some good, then it can’t have a preemptive effect and there can’t be primary jurisdiction,” he said.

“That would be a wonderful unintended consequence,” Gardner said.

Preemption means a federal law prevents the application of a likely more consumer-friendly state law in places such as California and New York.

Primary jurisdiction means an agency—not a court—should resolve a disputed question, like whether a particular labeling term on a specific food could mislead consumers.

Defendants frequently argue that food labeling suits should be put on hold or dismissed while the FDA determines whether a contested term is permitted.

For example, many “natural” suits, which make a substantial portion of food labeling litigation, were put on hold after the FDA sought public input on whether it should define the term.

If the FDA were to decide not to proceed with further review or rulemaking of the “natural” term, that could allow plaintiffs' attorneys the chance to argue their suits challenging the term should proceed in court.

‘Healthy,' ‘Added Sugar' Claims Too

So what other types of consumer suits, particularly in the food area, might see new filings or additional growth under a Trump White House according to consumer-side attorneys?

Expect a litigation uptick to include anything “that is hooking into the sort of health interest of consumers but isn’t really healthy,” Kats said.

Sugar, in particular, also will “be a continued focus,” she said.

That's regardless, Kats said, of what happens with nutrition facts labeling.

The FDA in May finalized a new “Nutrition Facts Panel” that changes the way calorie and nutrition information is displayed and includes, for the first time, a disclosure of how much sugar has been added to a food.

The new labeling isn't set in stone, though, and Trump could seek to undo the rule.

Under a 60-legislative-day reset provision in the Congressional Review Act, Congress may stop rules received after May 30, 2016, by a simple majority vote.

That means the nutrition labeling rule, which was received after the deadline, could be reversed without the need for a new rulemaking, according to the Congressional Research Service.

But Kats said regardless of how ingredients are presented on the Nutrition Facts Panel, having an ingredient list “doesn’t get food companies off the hook for otherwise misleading representations.”

Kats pointed to Williams v. Gerber Prods. Co., 552 F. 3d 934 (9th Cir. 2008).

There, the U.S. Court of Appeals for the Ninth Circuit said a reasonable consumer shouldn’t be expected to look beyond misleading representations on the front of a package to discover the truth from an ingredient list in small print on the back.

To contact the reporter on this story: Julie A. Steinberg in Washington at jsteinberg@bna.com

To contact the editor responsible for this story: Steven Patrick at spatrick@bna.com

Copyright © 2016 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Litigation on Bloomberg Law