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Food Labeling & Slack-Fill Lawsuits

By on October 27, 2016

Questions Presented

  1. What are the federal statutes and regulation governing food-label litigation?
  2. What is slack-fill in regards to food-label litigation?

Federal Regulations

“Natural” “GMO” “Organic”

The primary authorities in the federal regulation of food labels are from the Federal, Food, Drug, and Cosmetic Act (FFDCA), the Nutrition Labeling and Education Act (NLEA), the FDA and the Federal Trade Commission (FTC).  In addition to regulatory issues surrounding the terms “natural,” “GMOs,” and “organic” that have been involved in the significant food-labeling cases to date.

Congress Passes the FFDCA in 1938 to grant the FDA power to ensure that “foods are safe, wholesome, sanitary, and properly labeled.”  Two sections of the FFDCA that are often referenced in food-labeling lawsuits are sections 201(n) and 403(a).  Section 201(n) provides that a label is misleading if it fails to reveal facts that are material in light of representations made on the label, or in light of consequences that may result from the use of the food. Section 403 enables consumers to choose foods carefully by ensuring that the labels communicate accurate information. More specifically, section 403(a) states that a food is misbranded “[i]f. . . its labeling is false or misleading in any particular.”

In 1990, Congress amended the FFDCA to include the NLEA, which “sought ‘to clarify and strengthen the Food and Drug Administration’s legal authority to require nutrition labeling on foods, and to establish the circumstances under which claims may be made about nutrients in foods.’”  More specifically, the NLEA codified at 21 U.S.C. § 343 governs food nutritional labeling. It expressly preempts state-imposed nutrition labeling requirements and, as such, prohibits states from imposing labeling requirements that are not identical to federal standards. This section has been the subject of significant litigation. Plaintiffs try to avoid its scope by focusing their labeling claims on things that are not specifically addressed by the FDA, such as the term “natural.”

The FDA is responsible for protecting public health by ensuring the safety and proper labeling of all domestic and imported food, except meat, poultry, and processed eggs. Pursuant to its authority under the NLEA, the FDA has promulgated regulations permitting three types of nutrition claims on food packages: (1) health and qualified health claims; (2) nutrient content claims; and (3) structure/function claims.

The FTC has overlapping jurisdiction with the FDA regarding the regulation of advertising and labeling of food. These agencies coordinate their responsibilities through a Memorandum of Understanding that has been in place since 1971. Like the FDA, the FTC does not define “natural,” but rather decides such issues on a case-by-case basis. The FTC does require that companies have a reasonable basis for all express or implied claims made in food advertising. Some specific types of nutrition claims have received significant focus in litigation.

“Slack-Fill” Litigation

Congress vested authority to promulgate regulations to prevent nonfunctional slack-fill in the Secretary of Health and Human Services, as to food, cosmetics, devices and drugs, and the Federal Trade Commission, as to other consumer commodities. Pursuant to that authority, the secretary elected to regulate nonfunctional slack-fill as to food products, but not as to other commodities. The FTC has thus far declined to enact regulations.

The federal slack-fill regulations state that a food is impermissibly misbranded if its container is made, formed or filled to be misleading. A container is presumed to be misleading if (a) it does not allow consumers to fully view the contents and (b) it contains nonfunctional slack-fill. “Nonfunctional slack-fill is the empty space in a package that is filled to less than its capacity for reasons other than” the following safe-harbors:

(1) Protecting the contents of the package;

(2) The requirements of the machines used for packaging the product;

(3) Unavoidable product settling during shipping and handling;

(4) The extra packaging is needed to perform a specific function such as preparing the food;

(5) The container has a value and use that is independent of the food it contains; or

(6) Some minimum package size is necessary to accommodate required food labeling, discourage pilfering, facilitate handling, or accommodate tamper-resistant devices.

California Regulatory Regime For Nonfunctional Slack-Fill

California law has two separate provisions regulating nonfunctional slack-fill. Section 12606.2 of the California Business & Professions Code governs nonfunctional slack-fill regarding food packaging, and Section 12606 governs other commodities. Some courts have held that these provisions are preempted by federal law as to certain products. Accordingly, preemption should be considered as a defense in any slack-fill litigation. However, until there is more robust case law on the issue, or the regulations are ruled to be entirely preempted, it is advisable to consider California law addressing slack-fill compliance.

Section 12606.2, governing food packaging, imposes largely the same requirements as the federal regulations in this area, although it adds the word “substantially” to the following phrase: “Nonfunctional slack fill is the empty space in a package that is filled to substantially less than its capacity …” This suggests that, de minimis or insubstantial nonfunctional slack-fill in food packaging would not give rise to liability under the California statute.

Section 12606, governing all nonfood commodities, differs from federal and California slack-fill food regulations in several significant respects requiring careful analysis.

First, Section 12606(a) prohibits “false” sides to packaging, stating that “[n]o container wherein commodities are packed shall have a false bottom, false sidewalls, false lid or covering, or be otherwise so constructed or filled, wholly or partially, as to facilitate the perpetration of deception or fraud.” Arguably, the “deception or fraud” portion of that section applies to the whole sentence. However, since “deception” is often in the eyes of the beholder, in this situation regulators, plaintiffs’ counsel, and the courts, companies may choose to avoid false sides in California if possible, whether deceptive or not, until further guidance is provided by the courts.[1]

Second, California regulations for nonfood commodities includes language suggesting that only “substantial” nonfunctional slack-fill will support litigation.

Third, Section 12606 expands the available safe harbors from six to 15. The first six safe-harbors codified at Section 12606(b)(1)-(6) of the California Business & Professions Code mirror the federal safe-harbors for food packaging. California law adds safe-harbors seven through 15 as follows:

(7) The product container bears a “reasonable relationship” to the actual amount of product contained.

(8) The dimensions of the product are visible, or the actual size of the product is clearly depicted on the exterior packaging, with a notation that the product is “actual size.”

(9) The presence of headspace is necessary to facilitate the mixing, adding, shaking, or dispensing of liquids or powders by consumers prior to use.

(10) The exterior packaging contains a product delivery or dosing devise, the existence of which is readily apparent from the packaging.

(11) It is a kit designed to produce a particular result that is not dependent upon the quantity of the contents.

(12) The exterior packaging is routinely displayed using tester units or demonstrations to consumers in retail stores, so that customers can see the actual, immediate container of the product being sold, or a depiction of the actual size prior to purchase.

(13) Exterior packaging consists of holiday or gift packages and the purchaser can adequately determine the quantity and sizes of the immediate product container at the point of sale.

(14) The exterior packaging is larger due to the inclusion of a free sample or gift, the presence of which is conspicuously disclosed.

(15) The packaging encloses computer hardware or software designed to serve a particular function which is clearly and conspicuously disclosed on the exterior packaging.

Discussion

Natural

The FDA does not object to the use of the term on food labels if it is used in a manner that is truthful and not misleading and the product does not contain added color, artificial flavors, or synthetic substances. Use of the term “natural” is not permitted in the ingredient list, with the exception of the phrase “natural flavorings.” The FDA has long maintained this stance on the term “natural.”

In early 2014, three judges requested the FDA to provide a definition for “natural” as they believed that the issue was one for which the FDA had primary jurisdiction. For instance, in Cox v. Gruma Corp., United States District Court Judge Yvonne Gonzalez Rogers stayed the case for six months on primary jurisdiction grounds and referred the issue of GMOs and labeling of natural foods to the FDA for the first time. The court agreed with the defendants that the FDA, not the courts, should decide the issue and found that the FDA had primary jurisdiction over “the question of whether and under what circumstances food products containing ingredients produced using bioengineered seeds may or may not be labeled ‘Natural’ or ‘All Natural’ or ‘100% Natural.’”

The FDA declined the opportunity to address the issue and provided a number of reasons why it would not define the term “natural.” These reasons include that (1) amending its policy on the term would involve a public process; (2) it would require coordination and cooperation with the USDA and other federal agencies; (3) it would entail a consideration of a variety of things, such as scientific evidence, processing methods, consumer preferences and beliefs, food production, and First Amendment issues; (4) it lacks the resources to do so and has more urgent matters to look into; and (5) defining “natural” has implications well beyond the scope of the case immediately before the court. Thus, for these reasons, the term “natural” remains undefined by the FDA and continues to be a highly contentious issue in food-labeling litigation.[2]

GMO

GMO foods are those that have been genetically engineered, meaning that scientific methods were used to introduce new traits or characteristics to an organism. Such procedures can create a tolerance to herbicides, promote resistance to viruses, increase yields, and alter acidic content.  Ingredients derived from these GMO crops include amino acids, aspartame, ascorbic acid, vitamin C, citric acid, high fructose corn syrup, molasses, and xantham gum and are often found in foods as diverse as cereals, snack foods, and salad dressings. It has been estimated that GMOs end up in approximately 70% of all processed foods. Currently, states and legislature are sorting out whether GMOs should be labeled and whether they are good or bad for human consumption.

False Claims

These cases are broad and range from products that claim to be “natural” yet contain preservatives or high fructose corn syrup, falsely labeled that the product has “no refined sugars” when it actually does, and differences in terms such as “evaporated cane juice” which is the same as “sugar”.  The court has held for plaintiff in cases where the general consumer could be reasonable “duped” into thinking that a product is healthy and all natural, and the ingredient list is styled and written in a way to mislead, e.g., “evaporated cane juice” v. “sugar”.

“Paleo” diet foods excludes processed foods and those that include preservatives, sweeteners, or artificial coloring.  There have not been any cases yet, but with “claims” on packages and the possibility of processed foods in packaged items, these products are ripe for litigation.

Organic

Pursuant to federal law, a party cannot sell or label food as being “organic” unless it is produced and handled in accordance with the Organic Food Productions Act. For a product to be marketed or labeled as “organic” it must meet certain criteria. Specifically, the food must “(1) have been produced or handled without the use of synthetic chemicals. . . ; (2) . . .not be produced on land to which any prohibited substances, including synthetic chemicals, have been applied during the 3 years immediately preceding the harvest of the agricultural products; and (3) be produced and handled in compliance with an organic plan agreed to by the producer and handler of such product and the certifying agent.”

REGULATIONS AS TO THE LABELING AND MARKETING OF PRODUCTS LABELED AS “100% ORGANIC”

  1. For the packaging to use the term “100% Organic” to describe the product, the product must be made with all organic ingredients
  2. In the ingredient statement, each ingredient must have “Organic” written next to it
  3. Only water and salt may be included and not described as “Organic”
  4. The package must have the “USDA Organic” seal, and/or the seal of the agency which certified the product
  5. If third party seal is placed on package, it must not be larger than the USDA logo

REGULATIONS AS TO THE LABELING AND MARKETING OF PRODUCTS LABELED AS “ORGANIC”

  1. For the packaging to use the term “Organic” to describe the product, the product must be made of 95% organic ingredients
  2. The label may identify the percentage of organic ingredients in the product
  3. The organic ingredients are to be identified in the same font and style as the rest of the package, no larger than one half-size the largest font on the package, and with the same type size, style, and color of font, without highlighting
  4. The product cannot contain organic and non-organic versions of the same ingredient
  5. In the ingredient statement, each organic ingredient must have “Organic” written next to it
  6. Only water and salt may be included in the ingredients and not described as Organic
  7. The package must have the “USDA Organic” seal, and/or the seal of the agency which certified the product
  8. If third party seal is placed on package, it must not be larger than the USDA logo

REGULATIONS AS TO THE LABELING AND MARKETING OF PRODUCTS LABELED AS “MADE WITH ORGANIC”

  1. For the packaging to use the term “Made With Organic” to describe the product, the product must be made of not less than 70 % organic ingredients
  2. The packaging, other than the ingredient list, must not identify more than three ingredients as organic
  3. The organic ingredients are to be identified the same font and style as the rest of the package, no larger than one half-size the largest font on the package, and with the same type size, style, and color of font, without highlighting
  4. The product cannot contain organic and non-organic versions of the same ingredient
  5. In the ingredient statement, each organic ingredient must have “Organic” written next to it
  6. Only water and salt may be included in the ingredients and not described as Organic
  7. The package must NOT INCLUDE the “USDA Organic” seal
  8. The package must include the identity of the agency which certified the product
  9. If third party seal is placed on package, it must not be larger than the USDA logo

REGULATIONS AS TO THE LABELING AND MARKETING OF PRODUCTS MADE WITH LESS THAN 70% ORGANICALLY-PRODUCED INGREDIENTS

  1. Only the ingredient list may identify which ingredients are organic
  2. Only the ingredient list may identify what percentage of the product is made up of the organic ingredients
  3. The product cannot contain organic and non-organic versions of the same ingredient
  4. Water and salt may be included in the ingredients list but may not be described as “Organic”
  5. The package must NOT INCLUDE the “USDA Organic” seal
  6. The package must NOT INCLUDE the identity of any certifying agency

REGULATIONS AS TO THE LABELING AND MARKETING OF ORGANIC TEXTILE PRODUCTS

  1. If USDA seal is displayed, the Organic textile product as a whole must not be made up of less than 95% Organic ingredients
  2. For the packaging to use the term “Made With Organic” to describe the product, the product must be made of not less than 70% organic ingredients
  3. The packaging must not identify more than three ingredients as “Organic”
  4. The organic ingredients are to be identified the same font and style as the rest of the package, no larger than one half-size the largest font on the package, and with the same type size, style, and color of font, without highlighting
  5. The product cannot contain organic and non-organic versions of the same ingredient

REGULATIONS AS TO THE LABELING AND MARKETING OF ORGANIC COSMETIC PRODUCTS

  1. Cannot display USDA organic seal
  2. Must not contain less than 70% organic ingredients

Slack-Fill Litigation

Recent N.D. Cal. Cases Have Had Recent Success

Consumer class actions attacking slack-fill are relatively new, since enforcement has mostly been the province of state law enforcement.  One recent successful case is Hendricks v. Starkist, N.D. Cal., where a consumer who had purchased tuna in cans that were allegedly under-filled and substantially underweight filed suit against seller alleging breach of express and implied warranties, unjust enrichment, negligent misrepresentation, fraud, and violations of California’s Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL), and False Advertising Law (FAL).

Holdings: The District Court, Yvonne Gonzalez Rogers, J., held that:

  1. consumer’s state law claims were not expressly preempted by federal Food, Drug, and Cosmetic Act’s (FDCA);
  2. under-filling claims were not within special competence of the Food and Drug Administration (FDA), as required for primary jurisdiction doctrine;
  3. complaint sufficiently alleged both reliance and deception, as required for CLRA, UCL, and FAL claims;
  4. complaint stated claim for breach of express warranty;
  5. complaint stated claim for breach of implied warranty of merchantability; but
  6. claim for unjust enrichment was duplicative of claims under CLRA and UCL;
  7. complaint alleged fraud with sufficient particularity; and
  8. consumer had standing to bring claims based on products he had not purchased.

A narrow settlement and release has yet to be approved by the court, but has been in progress since last year with $12 million agreed to in February 2016.

But not all cases land on the side of the consumer.  In Ebner v. Fresh, a consumer brought putative class action against cosmetics manufacturer, alleging that manufacturer’s label, tube design, and packaging for its lip treatment product were deceptive and misleading in violation of California’s Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumers Legal Remedies Act (CLRA). The United States District Court for the Central District of California, James V. Selna, J., 2013 WL 9760035, entered an order granting manufacturer’s motion to dismiss, and consumer appealed.

Holdings: The Court of Appeals, Tashima, Circuit Judge, affirmed and held that:

  1. safe harbor doctrine barred claim that manufacturer’s label was deceptive in that only 75% of product was reasonably accessible;
  2. safe harbor doctrine did not bar claim that manufacturer omitted a supplemental statement about amount of product that was accessible;
  3. federal law did not preempt claim that manufacturer omitted such a statement;
  4. manufacturer did not violate California law by omitting a supplemental statement; and
  5. any product falling below dispenser’s stop device was not prohibited slack fill.

This case might be an outlier, since “slack-fill” is defined as empty space, meaning that even though part of the lip balm was inaccessible due to packaging, the space still had “fill” in it and was not empty.  This could apply in some food packages, but mostly would apply to cosmetic product packaging and similar.

In June, Dachauer v. NBTY, N.D. Cal., a class action just survived a motion to dismiss in a suit against a vitamin manufacturer for misleading labeling on vitamin E pill boxes.  The boxes say  The court held that the boxes were sufficiently misleading, consistent with the FDCA, to the extent that they make claims about the health benefits of mega-dose Vitamin E supplements rather than Vitamin E in general. And it’s possible that a reasonable consumer would, in fact, understand the labels to be making claims about mega-dose Vitamin E supplements.  The product labels here contain appropriate disclaimers, so the question is whether the labels “describe[ ] the role of a nutrient or dietary ingredient,” and whether the defendants have “substantiation” for those statements. To the extent the statements concern Vitamin E itself, the labels aren’t misleading, because Vitamin E is a “nutrient,” and the defendants point to studies substantiating their view that Vitamin E promotes immune function and helps support cardiovascular health. Dachauer, however, distinguishes between the nutrient Vitamin E itself and the defendants’ dietary supplements: according to the complaint, “the nutrient Vitamin E is not and should not be confused with Defendants’ mega-dose Vitamin E supplements.”  “While the nutrient Vitamin E is known as an essential nutrient, this does not mean that Defendants’ mega-dose Vitamin E supplements provide any health benefits,” because “Americans are getting sufficient amounts of Vitamin E from their diets,” and taking too much Vitamin E might even be harmful.

A reasonable consumer could understand the defendants’ labels to be making a statement about mega-dose Vitamin E supplements, rather than Vitamin E itself. The statements on the fronts of the labels are ambiguous: they say things like “Promotes Immune Function & Healthy Heart” and “Promotes: Immune Health / Heart Health / Circulatory Health / Healthy Skin,” but they don’t specify what actually promotes those things. A reasonable consumer could assume that those statements referred to the bottles’ specific contents – that is, the defendants’ mega-dose supplements – rather than Vitamin E in the abstract. Underscoring this point, the ambiguous statements appear directly underneath text emphasizing the fact that the bottles contain large doses of Vitamin E – for example, “E-400 IU” or “E-1000 IU / Pure dl-Alpha.” Additionally, the ambiguous statements appear next to pictures of the defendants’ specific softgel supplements. And while the backs of the labels assert, more precisely, that “Vitamin E” – the nutrient itself – “promotes immune function and helps support cardiovascular health,” the Ninth Circuit has stressed that “reasonable consumers should [not] be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box.” Williams v. Gerber Products Co., 552 F.3d 934, 939 (9th Cir. 2008); see also Jou v. Kimberly-Clark Corp., No. 13-cv-03075-JSC, 2013 WL 6491158, at *9 (N.D. Cal. Dec. 10, 2013).

Most recently, in Strumlauf v. Starbucks, in a class action alleging that starbucks does not fill their cups up to the advertised fluid ounces amount on their menu. The complaint alleged the following eight claims for relief: (1) Breach of Express Warranty; (2) Breach of the Implied Warranty of Merchantability; (3) Unjust Enrichment; (4) Violation of California’s Consumers Legal Remedies Act (“CLRA”); (5) Violation of California’s Unfair Competition Law (“UCL”); (6) Violation of California’s False Advertising Law (“FAL”); (7) Negligent Misrepresentation; and (8) Fraud.

Plaintiffs survived a motion to dismiss on June 17, 2016, where the court denied a motion to dismiss and held that in terms of “underfilling”: Plaintiffs’ three theories of underfilling are sufficient for Plaintiffs to establish standing because the allegations allow the Court to make the following reasonable inference: If all Starbucks lattes are made pursuant to a standardized recipe which results in the lattes being uniformly underfilled, and Plaintiffs allege that they purchased lattes, it is reasonable to conclude that – even without measuring – Plaintiffs’ lattes were underfilled. Having established their own individual standing, Plaintiffs in this putative class action may also allege claims of other class members “based on transactions in which the named plaintiffs played no part.” Garrison v. Whole Foods Mkt. Grp., Inc., No. 13-cv-5222-VC, 2014 WL 2451290 at *5 (N.D. Cal. June 2, 2014).

[1] http://www.consumerreports.org/cro/magazine/2015/09/packaging-downsizing-less-is-not-more/index.htm

[2] See Steinberg, “FDA Won’t Formally Define ‘Natural’, Judges Request in GMO suits Declined” Bloomberg BNA Jan. 8, 2014.

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