Courts in the Northern District of California continue to turn away lawsuits alleging that food and beverage companies must adjust protein content claims to account for protein digestibility.  In Brown v. Nature’s Path Foods, Inc., 2022 WL 717816 (N.D. Cal. Mar. 10, 2022), Judge Gilliam observed that recent FDA guidance reaffirms that companies may use the “nitrogen method” for protein content claims and that the agency’s “regulations do not require protein content claims to adjust for digestibility or to be calculated using amino acid contest testing.”  Because plaintiff was seeking to impose requirements under state law that the FDA does not, her claims were preempted.  The following month, Judge Chhabria granted a motion to dismiss in Brown v. Kellogg Company, 2022 WL 983268 (N.D. Cal. Apr. 1, 2022), concluding that those plaintiffs did not raise “any basis on which to distinguish the claims in [the] case” from another he had recently dismissed, as discussed here.  The next month, Judge Orrick reached the same conclusion in Brown v. Van’s Int’l Foods, Inc., 2022 WL 1471454 (N.D. Cal. May 10, 2022), concluding that “FDA regulations permit protein content claims to be calculated via the nitrogen method.”  This brought to five the number of recent decisions squarely rejecting plaintiffs’ theory that manufacturers cannot use the nitrogen method for protein content claims, including earlier decisions discussed here and here.

These cases often assert another theory of liability: that manufacturers are required by FDA regulations to include a “percent daily value” figure for protein in the Nutrition Facts Label (NFL) if they make a protein content claim elsewhere on the package, and that failing to include that “%DV” can be false or misleading under state law.  The courts have not yet adopted a uniform approach to these claims.  In Chong v. Kind LLC, 2022 WL 464149 (N.D. Cal. Feb. 15, 2022), the court held that such claims were subject to implied preemption under Buckman v. Plaintiffs’ Legal Committee, 531 U.S. 341 (2001), because the claims were “ultimately . . . dependent on the existence of violations of federal law.”  In other words, in the court’s view plaintiff’s claim under California law existed solely by virtue of FDA requirements.  Judge Orrick disagreed with this reasoning in Van’s, noting he “did not read Buckman or its progeny as sweeping so broadly” and concluding plaintiff was “suing for conduct that violates the FDCA, but not because the conduct violates the FDCA.”  Even though he found Buckman preemption did not apply, Judge Orrick nevertheless dismissed this theory in light of plaintiff’s failure to “plausibly allege that she was deceived by the omission of digestibility-adjusted protein figure from the Nutrition Facts panel.”  Judge Gilliam in Nature’s Path likewise dismissed this theory based on plaintiffs’ failure to plead reliance on the NFL, and thus expressly declined to reach the Buckman question.            

Taken as a whole, these five cases suggest that claims challenging a manufacturer’s use of the nitrogen method for protein content claims are unlikely to gain much traction in the Northern District of California.  However, a consensus approach has not yet emerged for claims challenging a manufacturer’s failure to include a “%DV” in the NFL—although the recent decisions certainly point to vulnerabilities in this theory that a savvy defendant should seek to develop.  More developments in this area are likely, as plaintiffs in three of the five cases (Kashi, KIND, and Kellogg) have now appealed the dismissal of their claims to the Ninth Circuit.

On May 24, Kellogg Sales Co. defeated a third putative class action alleging that Strawberry Pop-Tarts mislead consumers, having defeated two other putative class actions in March.  Represented by prolific plaintiffs’ firm, Sheehan & Associates, Stacy Chiappetta, Kelvin Brown, and Anita Harris each sued Kellogg after realizing that the filling in Strawberry Pop-Tarts contains not just strawberries, but also small amounts of dried pears, dried apples, and the food dye red 40.  But two federal judges in Illinois and a third in New York have now agreed with Kellogg that the packaging of Strawberry Pop-Tarts is not misleading for the simple reason that the pastries in fact contain strawberries.

Continue Reading Kellogg Beats Pop-Tarts Class Actions

Class action plaintiffs often attempt to drag an out-of-state parent company into a forum based solely on the contacts of a subsidiary under the so-called alter ego theory of personal jurisdiction (sometimes called a jurisdictional veil-piercing theory).  This theory allows a court to impute a subsidiary’s contacts with a forum to its parent when the subsidiary is found to be an “alter ego” of the parent company. 

Companies must understand how courts apply the alter ego jurisdictional theory and best practices to minimize the unique risks this theory presents.

Continue Reading A Closer Look: Avoiding Personal Jurisdiction Under An Alter Ego Theory

On May 23, 2022, the Supreme Court unanimously held that a party opposing arbitration is not required to demonstrate prejudice to show that the other party has waived its contractual arbitration rights. 

Before today’s decision, nine federal courts of appeals had adopted the rule that a “party can waive its arbitration right by litigating only when its conduct has prejudiced the other side.”  Morgan v. Sundance, 596 U.S. __ (2022).  Two other circuits had held no showing of prejudice was required.

Continue Reading Supreme Court Decision Makes It Easier to Waive Right to Arbitration

One of the most common failings of plaintiffs’ counsel is inadequate due diligence on the individuals they put forward as putative class representatives.  Defense counsel should not repeat that mistake.

It is not unusual for putative class representatives to have flawed personal claims or to be subject to important individual defenses.  A named plaintiff may also present facts that make his claim demonstrably atypical of the class, or he may have baggage – such as a past criminal conviction for fraud – that make him facially inadequate as a class representative.  Sometimes it turns out a named plaintiff isn’t even a member of the proposed class. 

Continue Reading Practice Pointers:  Know Your Plaintiff

The Southern District of California recently declined to certify a class based on plaintiffs’ failure to offer class wide proof of deception and materiality.  In Gross et al. v. Vilore Foods Company, Inc., plaintiffs alleged that Kern fruit juice products were deceptively labeled as “100% Natural” or made with whole fruit when the drinks in fact contained artificial ingredients.  Plaintiffs brought claims under various California laws, including the UCL, CLRA, and FAL.  To certify a class, plaintiffs were required to offer common proof both that the challenged representations were deceptive or misleading to a reasonable consumer; and that the challenged representations were material, meaning a reasonable person would attach importance to the representations that Kern’s fruit juice is “100% natural” or made with whole fruit.  The court held that plaintiffs satisfied neither burden.

First, as to deception, the only evidence Plaintiffs cited was their expert’s report.  Plaintiffs’ expert purported to assess the importance consumers placed on certain product attributes, and how claims such as “artificially flavored” affected their willingness to pay for a product.  Plaintiffs’ expert concluded that consumers were willing to pay approximately 29% more for a Kern product that did not disclose its use of artificial flavors, and approximately 30% less for a product disclosing that it contained artificial flavors.  The court found this evidence insufficient because consumers’ willingness to pay more or less for a product said nothing about whether the labels at issue would lead consumers to believe that the products did not contain artificial flavors, or contained only natural flavors.  As a result, the court held that Plaintiffs’ expert’s opinion could not constitute common proof of deception.

Continue Reading Consumer Survey Did Not Constitute Common Proof of Deception or Materiality

A recent Fifth Circuit decision continues the trend of courts rejecting putative class and collective actions where absent class members are subject to arbitration agreements.

Exotic dancers sued A&D Interests, Inc. (doing business as the “Heartbreakers Gentlemen’s Club”) in a putative Fair Labor Standards Act collective action for allegedly misclassifying the club’s dancers as independent contractors.  In re A&D Ints., Inc., – F. 4th –, 2022 WL 1315465 (5th Cir. May 3, 2022).  The plaintiffs and potential opt-ins had entered into arbitration agreements (1) specifying that arbitration would be on an individual basis and (2) waiving class action participation.  The district court nevertheless granted the plaintiffs’ motion to proceed with the collective action and issuance of notice because (1) the club had not moved to compel arbitration and (2) the agreements did not mention collective (as opposed to class) actions.

The club petitioned the Fifth Circuit for writ of mandamus, arguing that the district court’s order contravened In re JPMorgan Chase & Co., 916 F.3d 494, 501 (5th Cir. 2019), which held that “district courts may not send notice to an employee with a valid arbitration agreement unless the record shows that nothing in the agreement would prohibit that employee from participating in the collective action.”  A split panel of the Fifth Circuit agreed, reasoning that the plaintiffs’ agreements to submit disputes to individual arbitration foreclosed collective actions even if the class action waivers did not.  The majority also rejected the district court’s (and the dissent’s) view that the relevant clauses should “lie dormant until a party moves to compel arbitration,” and further noted that the club did attempt to enforce the arbitration agreements by opposing the collective action. 

Concluding that “the district court clearly and indisputably erred” in approving notice to opt-in plaintiffs who would be contractually barred from participating in a collective action, the majority granted the club’s petition.  In re A&D reaffirms the potential of arbitration agreements as an effective defense against class and collective actions – one that defendants may be able to invoke without even moving to compel arbitration of the named plaintiff’s claims.

A consumer purchases a product and later finds out that the product was contaminated with a toxic substance.  Was the consumer injured?  Without knowing more, the answer is “no”—at least for the purposes of establishing standing in the Third Circuit.  In Koronthaly v. L’Oreal USA, Inc., 374 F. App’x 257, 259 (3d Cir. 2010), the court held that mere exposure to lead in lipstick was not sufficient to support standing.  Years later, in In re Johnson & Johnson Talcum Powder Prods. Mktg., Sales Practice & Liability Litigation, 903 F.3d 278, 289, 290 n. 15 (3d Cir. 2018), the court held that mere exposure to a carcinogen in talcum powder is likewise not enough to establish standing.

Following this trend, District Judge Chesler in the District of New Jersey recently dismissed a case where plaintiffs alleged they purchased baby food contaminated with heavy metals.  See Kimca v. Sprout Foods, Inc. d/b/a Sprout Organic Foods, 2022 WL 1213488 (D.N.J. Apr. 25, 2022)

Continue Reading Were You Exposed to Toxic Substances in Consumer Products?  You May Lack Standing to Sue in the Third Circuit.

A California federal district court recently granted in part the dismissal of certain federal and state privacy claims, including a California Consumer Privacy Act (“CCPA”) claim, in Hayden v. The Retail Equation, Inc., No. 8:20-cv-01203 (C.D. Cal.).  Plaintiffs in Hayden alleged that twelve retailers unlawfully shared customer data with a computer software firm, The Retail Equation (“TRE”), which in turn created “customer risk scores” to identify potentially fraudulent customer returns.  This customer risk score was alleged to include information about the customers’ purchase histories, information gleaned from social media, as well as personal information, including name, government identification card or passport information, address, sex, race, and date of birth.  TRE and the retailers sought dismissal of: (1) the Fair Credit Reporting Act (“FCRA”) claim; (2) the CCPA claim; (3) the California invasion of privacy claim; (4) the Unfair Competition Law (“UCL”) claim; and (5) unjust enrichment claim.  The Court dismissed all but the invasion of privacy claim.

Continue Reading Court Grants in Part Dismissal of Certain Privacy Claims, Including CCPA Claim, Against The Retail Equation and Retailers

A recent class action refiled in federal court against Shopify highlights a growing trend  of lawsuits against companies related to the theft of cryptocurrency, particularly as a result of internal company threats.  See Forsberg et al v. Shopify, Inc. et al, 1:22-cv-00436 (D. Del.).  Despite not itself being a repository for or facilitating the sale of any cryptocurrency, the plaintiffs in the Shopify case allege that Shopify is liable for a theft of cryptocurrency after Shopify experienced a data breach caused by its own employees, which exposed a customer list for a cryptocurrency hardware wallet vendor, Ledger SAS.  As cryptocurrency storage and related transactions increasingly feature in companies’ online presence, there is likely to be a growing risk posed by threat actors motivated to target crypto-related assets and data, and more litigation activity in this space.

Continue Reading Companies Increasingly Facing Class Actions Connected to Cryptocurrency Theft