Why are so many class action lawsuits filed against the food industry?

Editor’s note: This is the first in a two-part series examining the phenomenon of class action lawsuits targeting the food and beverage industry. Tomorrow, Food Dive examines who ultimately wins in the flurry of legal action.

When Leroy Jacobs lived on St. Croix, the locally made ginger beer was a tonic for digestive ailments.

Thousands of miles away in his current home of Illinois, Crucian ginger beer is not readily available. But Canada Dry Ginger Ale is. So some years ago, Jacobs bought it in hopes of getting the same effect.

“It wasn’t working,” Jacobs said. “Ginger really is good for our stomach. It helps with the digestion. So that’s why I was buying it: for medical reasons.”

As he did some research, Jacobs learned that Canada Dry Ginger Ale contains no actual ginger — even though the label at the time read “Made From Real Ginger.” The soft drink is actually made of carbonated water, high fructose corn syrup, citric acid, preservatives and chemical flavoring. So Jacobs joined a class action lawsuit against the brand’s owner, the former Dr Pepper Snapple (now Keurig Dr Pepper).

The lawsuit, first filed in Massachusetts in 2018, charged that the soda company had falsely claimed that Canada Dry included real ginger to give it a more wholesome and natural impression in the mind of consumers. It demanded that the company change its labels to no longer claim ginger as an ingredient, and it also asked for financial damages for consumers who had purchased products based on the label claim.

The manufacturer raised a few arguments in its defense — including that reasonable consumers wouldn’t be deceived by the label, as well as issues with where and how the suit was filed. But it ultimately jointly settled the lawsuit and similar cases filed in Missouri’s circuit court and California federal court in 2019 for $11.2 million. Households that had purchased the soda since 2013 were eligible to receive up to $40 each in damages. The company also changed its labeling as a result, removing the ginger claim.

As a plaintiff named in the lawsuit, Jacobs received more in damages than others who purchased the soda. But regardless of the money, he said he was content with the result: Canada Dry changed its labeling.

“As long as the companies are held responsible and is willing to change what they’re doing, I’m pretty satisfied with that,” Jacobs said. “Stop the deceptive marketing.”

Filing or joining class action lawsuits is a way that many consumers bring their complaints to manufacturers. Scott Hardy, president and CEO of litigation tracking website Top Class Actions, said people need a way to be made right when a company does something that causes an issue.

“That’s the whole reason class actions are put out there,” he said. “You have a problem with a big corporation and you can’t sue them on your own for … [feeling cheated] out of $5 a month or 50 cents a purchase. But if you and 100,000 other people had that same problem, you should have a way to get it fixed.”

Food and beverage makers don’t look at class action lawsuits as a way to compensate consumers for corporate mistakes, said Rick Shackelford, co-chair of law firm Greenberg Traurig’s Food, Beverage and Agribusiness Practice. Shackelford has defended food and drink companies including PepsiCo, Krispy Kreme and Ocean Spray in class action cases, and he said manufacturers tend to look at them “pretty cynically.” After all, they can set off years of legal wrangling about minor product details and cost manufacturers millions of dollars to litigate or settle. (Several food and beverage companies did not respond to Food Dive requests for interviews about the general topic of class action cases.)

However, the lawsuits sometimes can show where labeling is ambiguous, or products have a defect that slipped between the cracks, he said.

Shackelford compared the whole situation to a professional hockey game. The FDA and other regulators are the on-ice referees, making sure that the rules dealing with ingredients, manufacturing processes and label claims are being followed. The players are the food manufacturers themselves, keeping an eye on what the others in their space are doing, watching out for improprieties, filing business-to-business lawsuits or complaints if needed, and using other marketing and distribution methods to keep everything in line.

“The consumer class action space just reminds me of the fans spilling onto the ice at a hockey game because they don’t like the way things are going and they’ve decided they’re going to try to enforce the rules and police it themselves,” Shackelford said. “It creates a lot of chaos. I’m not sure it helps the game all that well. But that’s kind of what it feels like. It’s difficult to know who the real policemen are.”

Class actions are going up

Before 2005, not many class action lawsuits were filed against food and beverage companies.

A California Supreme Court ruling opened the floodgates, Shackelford with Greenberg Traurig said. A group of consumers had sued several retailers about an additive in the food given to salmon raised in fish farms. This additive helped give the fish a pinker color, similar to that in wild caught salmon, but it was not disclosed on the packaging. The consumers argued the lack of disclosure was deceptive.

Lawyers for the grocers argued that the FDA has sole jurisdiction over labeling, and therefore the consumers had no ability to make a complaint. The plaintiffs countered that there are also state laws around consumer protection, and FDA’s jurisdiction doesn’t supersede state claims.

California’s top court agreed with the consumers, saying that they had an avenue to bring the case. And after that, Shackelford said, all sorts of class action cases were filed.

Law firm Perkins Coie, which often defends manufacturers, grocery stores and foodservice companies, has been tracking class action lawsuits in the food and beverage space for more than a decade. An all-time high of 220 cases were filed in 2020, a 22% increase from the 179 cases filed in 2019. Half of those cases accuse CPG companies of falsely labeling their products.

Rick Shackelford

Co-chair of Food, Beverage and Agribusiness Practice, Greenberg Traurig

Charles Sipos, a partner in Perkins Coie’s food litigation segment, said that despite the consumer-serving angle that arguments in class action lawsuits take, many of the cases seem to be driven by lawyers who see a potential issue that can be litigated. These plaintiffs’ lawyers, Sipos said, search for consumers to serve as defendants and file lawsuits against different companies in different courts.

“You can just literally go to your supermarket in order to do your pre-suit due diligence — which is you go and you find a product that you think you can assert a claim on — and then find a client who will allow you to use them as the plaintiff, and then you’re off and running,” Sipos said.

Because of the relative ease of filing a case, as well as the multiple state jurisdictions where products are sold and consistent labeling trends, a single issue — or a single lawyer — can dominate the cases that are filed. According to Perkins Coie’s report, nearly a quarter of all of the lawsuits filed in 2020 dealt with claims of deceptive labeling of vanilla-flavored products. They all were filed by one attorney: Spencer Sheehan.

Consumers: These cases are about righting wrongs

Sheehan is one of the most prolific attorneys in the food and beverage class action space.

According to federal court records, he has represented clients in more than 400 class action lawsuits. The vast majority are in the food and beverage space. He said he didn’t have a strong desire to get involved in class action suits, but he found himself struck by consumers’ desire for fairness from companies. What he called a “small type of deception” — failure to honor discounts in a circular, labeling products in a not-quite accurate way, not being as accommodating in a return policy — are harmful to consumers.

“Those types of things just always bothered me,” Sheehan said. “It was something like, you want to complain or call a customer hotline or whatever, [but] you’d never get anywhere.”

There are several people who routinely contact Sheehan to talk about things they have seen, but he likened these calls to a police tip line: Many of the leads are not worth pursuing.

As he started doing more food industry class action cases, Sheehan learned about the space — and started seeing more potential deception. And as he sees more, he files more cases.

This is how his series of vanilla cases began. In February 2019, Sheehan filed a case against A&W brand owner Keurig Dr Pepper, taking the company to task for having a “Made with Aged Vanilla” label claim on its root beer and cream soda products. However, there is no actual vanilla in the products, the case argues, and they predominantly get their taste from artificial flavoring. In its defense, Keurig Dr Pepper argues there is some real vanilla in its beverages, and it can be detected in lab tests. (Food Dive has reached out to the company for comment.)

That case, filed in a federal court in New York, is still pending. But as Sheehan did his research, he learned that A&W is not the only company that labels this way. Several companies make vanilla-flavored products, ranging from ice cream to cookies to plant-based milk. But the label just calls them “vanilla” and doesn’t indicate that the product may use artificial flavoring to mimic the taste of the tropical bean. Manufacturers and their attorneys argue, however, that vanilla is an extremely expensive flavor and all products would cost much more if they were completely flavored with vanilla bean extract.

“Consumers, they shouldn’t have to commission a lab test to know what’s in their products,” Sheehan said. “It’s supposed to be stated conspicuously up front on the product. That’s not asking too much.”

“You can just literally go to your supermarket in order to do your pre-suit due diligence — which is you go and you find a product that you think you can assert a claim on — and then find a client who will allow you to can use them as the plaintiff, and then you’re off and running.”

Charles Sipos

Partner in food litigation segment, Perkins Coie

At Hardy’s Top Class Actions website and newsletter, a team of reporters cover noteworthy lawsuits, while attorneys advertise their cases and settlements to prospective class members. Hardy estimated that 30% to 40% of the cases covered by his site deal with food and beverage, and he described his readers as very engaged.

“People want to know about the products and the food that they’re ingesting,” Hardy said. “…They have this food and snack that they buy every single month, if not every single week. And so when all of a sudden, that brand is enmeshed in a class action, and they believe that they might have been wronged in some way, shape or form, they want to sit there and comment.”

“Consumers, they shouldn’t have to commission a lab test to know what’s in their products. It’s supposed to be stated conspicuously up front on the product. That’s not asking too much.”

Spencer Sheehan

Prolific class action attorney

Sheehan said he imagines food and beverage companies don’t like his cases because they don’t like being sued. And some consumers feel like he is wasting the time of both the courts and the food and beverage industry.

“If you’ve ever gone into the cesspool of the internet comments, which I do now and then, you see the hatred and vitriol that exists there,” Sheehan said. “You’ll often see, ‘Oh gosh, this is a frivolous lawsuit.’ I’m just grateful that we have a more reasoned way to evaluate cases.”

The detractors, Sheehan said, are often people who could be “not amenable to reason or logic.” But, he said, he believes he is doing something to help consumers — even if his cases go after companies for continuing long-standing or industry-wide practices.

“Because it is happening or has been happening for a while doesn’t mean that it should continue to happen,” he said.

Companies: These cases are about lawyers testing ideas for a payout

Perkins Coie’s Sipos, who has defended manufacturers including General Mills and Kraft Heinz in class action suits, said these cases are rarely about an independent consumer noticing something amiss after purchasing a product and using the courts to make that complaint.

Instead, he said, cases are generally lawyer-driven.

“The overwhelming reason they continue to be filed is plaintiffs’ counsel have kind of come to the conclusion that there can be good and economically viable cases if filed that will result in some kind of settlement or payout that makes the case profitable as the plaintiff’s lawyer,” Sipos said.

To wit, class action lawsuits tend to follow larger patterns. Sheehan’s spate of vanilla-related cases are all testing one basic theory: When consumers see a product labeled “vanilla,” they assume that it’s made with extracts from the vanilla bean. The theory has been tested with cases filed about several different kinds of products, ranging from coffee creamer to ice cream. Sheehan said the high number of cases reflect the multitude of products touting vanilla flavoring, the variety of similar SKUs and the different states where products are sold.

Shackelford with Greenberg Traurig has seen other catalysts inspire class action lawsuits, including reports done by researchers and news stories.

For example, a February report from the U.S. House of Representatives Subcommittee on Economic and Consumer Policy found that commonly purchased baby food brands have “dangerous levels” of arsenic, lead, cadmium and mercury. Arsenic, a naturally occurring mineral that can be absorbed into plants through soil and water, has been detected in product tests of items including baby food and bottled water. The House report has spawned more than 80 lawsuits against manufacturers, according to Food Safety News.

But not all lawsuits are based on such serious issues. A 2007 Prevention Institute report called “Where’s the Fruit?” found many heavily advertised products for children have fruity sounding names, but not much actual fruit.

“To some people, they claimed this was a great surprise — a bit like finding out that there was gambling going on at Rick’s Casino,” Shackelford said.

The lawsuits and complaints that came up after this report, he said, bordered on the absurd. Shackelford recalls complaints claiming that the fruit content of Juicy Fruit gum — a product not meant for eating and with little nutritional value — was not as high as expected. Other lawsuits were summarily thrown out, including one saying that the product name of Froot Loops is deceptive because the cereal doesn’t contain much actual fruit, and another challenging Quaker Oats owner PepsiCo because the Crunchberry pieces in Cap’n Crunch cereal were not actually fruit.

“If you can come up with a theory and find a plaintiff who bought the product, then it’s just a matter of drafting the complaint and putting it on file,” Sipos said.

Source: fooddive.com