Protecting Yourself from Class Action Lawsuits

Over the past few years, the food industry has become the darling of the plaintiffs’ class action bar. Food companies have everything that class action lawyers love: huge numbers of consumers; heavy advertising; products that do not cause physical injuries; and defendants who sometimes prefer settlement over litigation.

The central concept in class litigation is that one or a small number of claimants can establish a right of recovery for a much broader group. Courts recognize that no one would sue to recover a $5 loss, but where 25 million people experienced the exact same loss, class actions create a financial incentive to litigate.

America’s food supply is safer than ever. Yet if you read new legal filings, it would seem that our food belongs on a superfund site, and that corporate monoliths trick us daily into eating food that makes us fat, fools, or both. Class action cases follow several predictable themes.

Your food did not deliver a promised benefit! Seizing on consumer desire for dietary health benefits, class actions have alleged that products do not deliver what they promise. For example, yogurt manufacturers have faced numerous class actions alleging that they lack adequate support for claims that probiotics aid health and boost immunity. Another set of cases allege that an oat cereal falsely claimed the ability to reduce cholesterol.

Your product was not organic or natural! Another popular theme is that companies improperly advertise products as “organic” or “natural.” A recent wave of class actions asserted that milk products did not qualify as organic. Other cases have asserted that products containing processed ingredients, such as fiber and high fructose corn syrup, cannot be deemed natural .

Are you trying to poison me? Increasingly sensitive analytical methods sometimes reveal that foods contain trace levels of chemicals with scary names. Even at levels that would not cause harm, class actions assert that consumers would never have purchased the product had they known of the chemical. Complaints have focused on mercury in tuna, benzene in soda, and metals in other products.

You hit me with a frying pan! Class action lawsuits have focused on packaging and food-contact surfaces. For example, a spate of class actions against a manufacturer of non-stick cookware sought reimbursement of the purchase price on the premise that the non-stick chemical creates an undisclosed health risk. Meanwhile, manufacturers of plastic bottles face suits alleging that consumers would not have purchased their products had they known about the presence of bisphenol A.

I didn’t get what I paid for! Even products that do not purport to be healthy attract class action complaints. One plaintiff alleged that he paid more for a soda than he would have had he known that it came from California, and not the Southwest. Another set of cases charged manufacturers with falsely advertising children’s cereals as fruit, when they, in fact, contained no fruit.

Thankfully, companies have many defenses to these cases. Consumers do not act for uniform reasons. Some people buy probiotic yogurt because it tastes good. People have eaten oat cereals for years with no expectation it would cure hypercholesterolemia. Some class actions also rest on bogus legal theories. With grit, companies can often beat these cases, as did a number of the companies mentioned above. Still, these cases are expensive to defend and can tarnish brand image. Careful compliance with the Better Business Bureau’s code of advertising, as well as the pronouncements of FDA and the FTC, provides a first line of defense. But class litigation gives new urgency to old precepts.

 Recognize the scrutiny to which your products will be put. You must know everything about your product. The ability to provide strong, scientific support for your claims provides your best inoculation against trouble. No matter what you say about your product, someone will say that they relied on it. Qualified claims can still sell product, and will deter litigation by reducing the ability of consumers to say they uniformly understood something different from what you said.

Class action litigation usually starts with news headlines, which come from regulatory actions and from press releases by public interest groups. Once litigation starts, “copycat” cases target other companies and similar products. Consider your advertising campaign in light of industry experience. You may also have chances to adjust your business practices as scientific and legal developments warrant.

As long as the plaintiffs’ class action bar makes money on these suits, they will continue to file them. With fortitude, you can often beat them.
With forethought, you can reduce your risk.

Anthony J. Anscombe is a Partner at Sedgwick LLP, Chicago, IL 60606 ([email protected]).