Expansion of Liability

Retail Label Liability

State laws create new opportunities for consumer fraud lawsuits when it comes to product labeling.

By J. Christian Nemeth and Daniel Campbell

An unprecedented surge in consumer fraud lawsuits over the past several years has consumers and lawyers closely scrutinizing product labels and advertisements. Although many of these claims challenge the veracity of “organic,” “healthy,” and “100%” claims on labels, several states are affording new opportunities to attack ingredient labels – an area that federal courts have traditionally found to be preempted (barred) by the Food and Drug Administration (FDA) with no private right of action for individual citizens. Certain state laws are changing that landscape.

The Nutrition Labeling and Education Act (NLEA), which amended the Federal Food, Drug, and Cosmetic Act (FDCA) to give the FDA authority to require nutrition labeling on virtually all food products, provides no private right of action for individuals to enforce the provisions of the NLEA. Furthermore, the NLEA contains a preemption provision mandating that no state law claim can impose any food labeling requirement that is “not identical” to the NLEA requirements.

Plaintiffs, however, often attempt to bring consumer fraud actions based on violations of these federal ingredient label requirements. The vast majority of case law in this area has held that such consumer fraud actions are preempted by the FDA and that there is no private right for an individual to bring a case in this area.

However, a number of states have enacted law that seems to complicate this federal preemption analysis. Starting with California, several states enacted statutes prohibiting the mislabeling of food that is identical to the requirements of the FDCA and NLEA. Illinois, New York and New Jersey also have similar statutes adopting the FDCA and its amendments. Unlike federal law, these state statutes provide the ability for citizens to sue privately. This development in the law is often used as a vehicle for plaintiffs’ attorneys to creatively expand jurisdiction and assert a private right of action under state consumer fraud statutes.

In one such California case, Reid v. Johnson & Johnson, the reviewing court reversed the lower court’s dismissal of the plaintiff’s false advertising lawsuit against the manufacturers of Benecol, a vegetable oil-based butter substitute. The district court dismissed the case, stating that it could only be brought under federal law. The plaintiff alleged that the defendant misled consumers by claiming the product contained “No Trans Fat” on its packaging, when in fact Benecol does contain trans fat. Defendants argued that the plaintiff’s claim, based on California state law, was preempted by the NLEA, which allows “insignificant” amounts of trans fat to be labeled as zero grams. The lower court agreed. The reviewing court, however, rejected the lower court’s ruling and found that the plaintiff’s claims amounted to a violation of the FDA’s regulation on “nutrient content claims.”

Although a declaration of trans fat content information is not required by the FDA if a product contains less than 0.5 grams of total fat in a serving, by asserting the product contained “No Trans Fat,” the defendants made a nutrient content claim about their product. Because the nutrient content claim was alleged to be misleading under FDA regulations, plaintiff’s state law claim that Benecol’s packaging misled consumers was allowed to proceed. Reid v. Johnson & Johnson, 780 F.3d 952 (9th Cir. 2015).

Retail Label Liability2Similarly, in McMahon v. Bumble Bee Foods LLC, the plaintiff brought a state law claim under the Illinois Food, Drug and Cosmetic Act (IFDCA) for alleged violations of FDA regulations. The plaintiff claimed that labeling on defendant Bumble Bee’s products claiming that the products were an “Excellent Source [of] Omega-3” violated the FDA’s regulations. Although the FDA had yet to implement standards that described a high level of Omega-3, it still required any manufacturer wishing to make an Omega-3 claim to submit an application beforehand. The defendant did not file an application and this amounted to an alleged failure to comply with FDA regulations.

Despite the defendant’s claim that the Illinois law claim was preempted by the federal law, the court allowed the plaintiff’s lawsuit to proceed with a deceptive business practices claim based on a violation of the Illinois law alone. The court found that the plaintiff had a private right of action under Illinois state law and the identical federal law did not apply to preempt the state law claim. McMahon v. Bumble Bee Foods LLC, 2015 WL 7755428 (N.D. Ill. 2015).

New York and New Jersey have similar statutes to allow private rights of action for violations of FDA regulations. See Ackerman v. Coca-Cola Co., 2010 WL 2925955 (E.D.N.Y. July 21, 2010) and Stewart v. Smart Balance, Inc., 2012 WL 4168584 (D.N.J. June 26, 2012). We expect to see more consumer fraud claims based on the violation of state labeling statutes given that courts are increasingly finding a private right of action under state law concerning the FDA’s labeling requirements.

J. Christian Nemeth is a partner at McDermott Will & Emery where he provides legal counsel on complex commercial litigation, including class actions and other commercial disputes in the food, beverage and agribusiness industries. He can be reached at jnemeth@mwe.com. Daniel Campbell is an associate at McDermott Will & Emery where he focuses on commercial litigation matters, including collective and class actions and products liability actions. He can be reached at dcampbell@mwe.com. Summer associate Elizabeth Rowe contributed to this article.

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