Monday, August 16, 2010

The secret ingredient is sugar

Ackerman v. The Coca-Cola Co., 2010 WL 2925955 (E.D.N.Y.)

The plaintiffs filed a putative class action against defendants alleging violations of California, New York, and New Jersey consumer protection laws, as well as warranty, deceit and unjust enrichment claims under the common law. Defendants moved to dismiss based on preemption and failure to state a claim, and plaintiffs largely succeeded in preserving their claims.

Defendants make vitaminwater. Plaintiffs bought it, allegedly because of the following health/nutrient claims: 1. The description of the product as a "Nutrient-Enhanced Water Beverage"; 2. The phrase "vitamins + water = all you need" on the product label; 3. Flavor names such as "rescue" and "defense"; 4. The name "vitaminwater" itself; 5. The statement "vitamins water = what's in your hand" on in-store advertising materials; 6. The statement "this combination of zinc and fortifying vitamins can ... keep you healthy as a horse" on the label of vitaminwater's "defense" flavor; 7-12 “specially formulated” claims about reducing the risk of various diseases on various flavors. These claims are allegedly misleading because they distract consumers from the significant amount of sugar in the product; portray vitaminwater as healthy when it’s essentially a snack food that only provides nutritional benefits because it’s been specially fortified to do so; and suggest that vitaminwater contains nothing but vitamins and water.

Defendants argued express and implied conflict preemption, given the Nutrition Labeling and Education Act and other FDA requirements. The FDCA preempts any non-identical state law requirements for nutrition and health-related claims in labeling. California, New York and New Jersey all prohibit misbranding of food, in language largely identical to that in the FDCA.

There’s a presumption against preemption in food and drug regulation, and when there’s an express preemption clause, as here, that clause should be read narrowly. There are two ways to escape express preemption here: (1) only impose requirements identical to those in the FDCA, which can include providing a damage remedy for conduct that otherwise violates federal law, even if the federal statute provides no private right of action; or (2) don’t impose requirements on claims described in the FDCA’s preemption provision, so that causes of action based on ad statements would not be preempted unless the ad qualifies as labeling under the FDCA (however, the court noted that “in-store advertising” is labeling because the law defines labeling broadly as statements accompanying the products). The relevant law “preempts only claims based on statements that expressly or by implication characterize the level of a nutrient or the relationship of a nutrient to a disease or health related condition; claims based on statements not falling into those categories are not preempted.” Moreover, breach of warranty claims are generally not preempted because they’re not requirements imposed by state law, but rather imposed by the warrantor. However, this is only true when the statements at issue are not required by federal regulations.

Plaintiffs argued that their claims were based on misleading statements that violate FDA regulations. The court rejected the argument that it was misleading under FDA regulations to make health claims or implied nutrient content claims despite the high amount of sugar in the product. But the court agreed that (1) making those claims despite the fact that vitaminwater has been fortified in violation of the FDA’s fortification policy, and (2) prominently featuring the name of some, but not all, ingredients in the product name and label, could violate the regulations according to the allegations of the complaint.

The FDCA authorizes regulations about “disqualifying nutrient levels”: nutrient levels that preclude any health claims about a product. Under the current rule, only four such nutrients can be disqualifying: total fat, saturated fat, cholesterol, or sodium. Sugar is not on that list, and thus defendants can’t be prohibited from touting the purported benefits of other ingredients based on high sugar content; the FDA’s decision to exclude sugar as a disqualifying ingredient was entitled to preemptive force.

However, plaintiffs also alleged that vitaminwater violates the FDA’s fortification policy. FDA regulations don’t permit health claims, or nutrient content claims involving “healthy” or derivatives, unless the food at issue contains, in customarily consumed quantities, at least 10% of the recommended daily reference quantity of vitamin A, vitamin C, calcium, iron, protein or fiber. To use “healthy,” a manufacturer may fortify to reach the 10% threshold only if it’s consistent with the FDA’s fortification policy, which bars the “indiscriminate addition of nutrients to foods.” For health claims, the food must contain the threshold level prior to nutrient addition. The words "more," "fortified," "enriched," "added," "extra," or "plus" are also barred if the addition of the nutrients itself violates the fortification policy. The FDA sent a warning letter to defendant Coca-Cola in 2008 about Diet Coke Plus, concluding that the product was misbranded because the addition of vitamins to snack foods such as carbonated beverages was contrary to the FDA’s fortification policy.

This rule is colloquially known as the “jelly bean rule,” designed to prevent food producers from promoting junk foods by fortifying them with nutrients. The FDA has noted that “There is great potential to confuse consumers if foods like sugars, soft drinks, and sweet desserts are fortified to qualify for a health claim when, at the same time, dietary guidance as contained in USDA's Food Guide Pyramid, for example, states that ‘[T]hese foods provide calories and little else nutritionally. Most people should use them sparingly.’” Nutrient content claims generally are still allowed, but not health claims or nutrient content claims that use the word “healthy” to suggest consuming the food because of its nutrient content as a way of maintaining a healthy diet. The court held that vitaminwater’s labeling contains both types of claims. Though not every use of “healthy” conveys an implied nutrient content, the context of the other claims here might imply that the product will assist consumers in maintaining healthy dietary practices. The “specially formulated” claims likewise were health claims. Because, the court found, vitaminwater is not in compliance with the FDA’s fortification rule, any health claim is contrary to FDA regulation.

The defendants failed to establish that vitaminwater’s fortification complies with FDA policy, which holds that “random fortification of foods could result in over- or underfortification in consumer diets and create nutrient imbalances in the food supply" and "could also result in deceptive or misleading claims for certain foods." 21 C.F.R. § 104.20. Fortification is appropriate only to correct a scientifically recognized dietary insufficiency; to restore nutrients lost in storage, handling, and processing; with respect to 21 specified nutrients not at issue here, in proportion to the total caloric content, to balance the vitamin, mineral, and protein content; or to avoid nutritional inferiority when replacing a traditional food. Defendants didn’t meet their burden (theirs because they were asserting preemption) of showing that any of these applied.

Next, plaintiffs alleged that vitaminwater’s labeling is misleading because the product name includes two of its ingredients but fails to mention one other notable ingredient, sugar. The FDA recognizes that such product names may mislead, even though all the ingredients are listed elsewhere on the label. “The potential for confusion is heightened by the presence of other statements in vitaminwater's labeling, such as the description of the product as a ‘vitamin enhanced water beverage’ and the phrases ‘vitamins water = all you need’ and ‘vitamins + water = what's in your hand’ which have the potential to reinforce a consumer's mistaken belief that the product is comprised of only vitamins and water.’”

These claims were therefore not preempted: they sought to impose requirements on the defendants identical to those imposed by the FDCA.

The implied preemption defense fared no better, except with the already-preempted sugar content claim.

Defendants also argued that the court should defer to the FDA under the primary jurisdiction doctrine. The court disagreed. Courts are well-equipped to handle the question of whether defendants violated FDA regulations and marketed a misleading product. Courts decide what’s misleading every day. Moreover, the FDA lacks the resources to act every time its policies are violated. There’s no reason to believe plaintiffs could obtain a timely resolution from the FDA.

Independent of that, did plaintiffs state a claim under state consumer protection laws? Viewing each allegedly misleading statement in context, it was not possible to conclude as a matter of law that reasonable consumers would not be misled. The FDA has recognized the potential for misleadingness in incomplete product names, and that potential was heightened by the other health and “vitamins + water” claims surrounding the product and the description of the product as a “nutrient enhanced water beverage.” “The plaintiffs have sufficiently alleged that the collective effect of the challenged statements was to mislead a reasonable consumer into believing that vitaminwater is either composed solely of vitamins and water, or that it is a beneficial source of nutrients rather than a ‘food of little or no nutritional value [which has been fortified] for the sole purpose of’ claiming or implying that it is ‘healthy.’” The court gave substantial weight to the FDA’s determination that fortification of a food in a way inconsistent with the fortification policy may be misleading.

Defendants argued that no reasonable consumer could have been misled because (1) the FDA-mandated label on each bottle shows the amount of sugar per serving; (2) the name "vitaminwater," the one-word flavor names like "rescue," slogans like "vitamins water = all you need," and sayings like "healthy as a horse" are puffery; and (3) no reasonable consumer could believe that vitamins and water are literally "all they need to survive" or all that "is in your hand" when holding a bottle that disclosed the presence of sugar.

But stating the actual sugar content in the nutritional label doesn’t eliminate the possibility that reasonable consumers could be misled. Following Williams v. Gerber Products Co., 552 F.3d 934 (9th Cir. 2008), the court reasoned that reasonable consumers shouldn’t be expected to look beyond misleading representations on the front of a package to discover the truth in the small print. “[E]ven reasonable consumers may not read the nutritional label prior to every purchase of a new product,” the court wrote, citing a survey showing that only 60-80% of food shoppers read the label before buying a new food. The court also directed criticism at the label here: sugar and calorie content are listed on the assumption that a 20-ounce bottle has 2.5 servings. This is allowed by FDA regulations, but defendants could also have chosen to give per bottle information.

Defendants argued that the sweet taste of vitaminwater puts consumers on notice of the sugar content. The court said: (1) there was no evidence of taste in the record, and it was not appropriate to take judicial notice that sugar makes things sweet, since there exist products like ketchup that are not sweet; (2) a reasonable consumer might believe that something other than sugar was the sweetener; and (3) defendants are not entitled to one bite at the apple in violation of the consumer protection laws.

Nor were the statements puffery. They described the contents of a food product in ways on which consumers might reasonably rely. Here’s an interesting statement: “Further, consumers who have some awareness that food product labeling is subject to government regulation (owing in part to the ubiquitousness of the FDA's "nutrition facts" label on food products) may reasonably be expected to rely on label claims as accurate depictions of a food's contents and nutritional value.” And in fact it seemed clear to the court that defendants intended to convey that impression; it was hard to imagine what else they might have had in mind. Puffery was at least not resolvable on a motion to dismiss.

The court concluded that, even if Rule 9(b) required pleading all the California claims with particularity (which it did not decide), the allegations of the complaint satisfied the heightened standard. Plaintiffs adequately alleged reliance (had they known the truth that vitaminwater was sugar water and not a beneficial dietary supplement, they would not have bought the beverages) and injury (failing to receive the benefit of the bargain). “California courts have liberally construed the requirements for pleading reliance in cases in which it would be impractical to expect a plaintiff to recall with specificity each statement that he or she considered prior to making a purchase.”

Similar results obtained for the New York claims (though reliance is not an element of a §349 claim, albeit it is for a §350 claim). Injury was adequately alleged by claims that plaintiffs paid a premium for the product based on defendants’ inaccurate representations.

With New Jersey’s Consumer Fraud Act, Rule 9(b) did apply because plaintiffs alleged both affirmative misrepresentations and intentional omission of material facts with intent to cause consumers to buy vitaminwater, and plaintiffs failed to plead with the requisite particularity. As opposed to the detail in the complaint about the California claims, the complaint contained “no information regarding: (1) when or how often during the class period the New Jersey plaintiffs purchased vitaminwater; (2) where they purchased vitaminwater, or whether any purchases occurred within the state of New Jersey; (3) what variety of vitaminwater they purchased.”

The court also dismissed the breach of warranty claims under all three state laws, because plaintiffs failed to plead a claim for violation of an express warranty by identifying appropriately specific statements. There was also no breach of an implied warranty of merchantability, because that only provides for a minimum level of quality, which was not at issue here. An implied warranty of fitness for a particular purpose would also have failed, because the complaint didn’t allege that defendants knew that any particular plaintiff purchased vitaminwater to get a healthy beverage. “Consumers may seek beverages for a variety of purposes; indeed some may desire the beverage precisely because it contains high levels of sugar.”

Tracking the consumer protection law results, the court found plaintiffs had stated a claim for common law deceit/misrepresentation under New York and California but not New Jersey law.

1 comment:

  1. This may be true from your post that secret ingredient is sugar. But the Consumer protection law has done the thing in right manner.

    ReplyDelete