On May 20, 2020, the Eleventh Circuit affirmed the dismissal of a proposed class action against General Mills for its alleged failure to disclose the presence of a harmful chemical in its Cheerios cereal. The Eleventh Circuit agreed with District Judge Robert N. Scola Jr.’s finding that the Plaintiff failed to allege an actual injury sufficient to confer Article III standing.[1]

The Plaintiff alleged General Mills failed to disclose that its Cheerios and Honey Nut Cheerios contain trace amounts of glyphosate, the herbicide that was the subject of the well-publicized class actions involving Monsanto Roundup. [2] The putative class representative sought to establish both a nationwide class and a Florida class of purchasers of Cheerios or Honey Nut Cheerios during the applicable class period.[3] In addition to claims of breach of warranty, unjust enrichment, violations of Florida’s deceptive practices act (FDUPTA), and restitution for revenues General Mills earned by purportedly misleading consumers, the Complaint also sought an injunction requiring General Mills to change the company’s allegedly deceptive practices.[4]

Continue Reading Big Win For General Mills as Eleventh Circuit Affirms Dismissal of Contaminated Cheerios Class Action

In the latest of a series of antitrust lawsuits involving the food industry, a Virginia federal court last week denied a motion to dismiss a class action lawsuit alleging a price-fixing conspiracy in the peanut market.

The class is comprised of peanut farmers and harvesters that sell the raw peanuts to the Defendants, who then process, shell, and sell the final product to food companies or other manufacturers.[1]

According to the Class Plaintiffs’ April 2020 Amended Complaint, beginning as early as 2014, Defendants Birdsong and Golden Peanut — together controlling 80-90% of the peanut shelling industry market — conspired to suppress and keep stagnant prices paid to farmers for raw and harvested peanuts (“Runner Peanuts”).[2]

The Class alleges that Defendants used their supermajority market share and control over the peanut shelling trade associations to publish misleading statements and overstate Plaintiffs’ Runner Peanut inventory to the U.S. Department of Agriculture (“USDA”), in order to create the illusion that there was an oversupply of raw peanuts. This, in turn, allowed Defendants to coordinate artificially lower price terms in option contracts offered to peanut farmers.

The Court rejected Defendants’ claim that natural market forces and farmer subsidies provided by the 2014 Farm Bill were responsible for the oversupply of peanuts, [3]  as well as the Defendants assertion that the alleged parallel conduct alone was insufficient to support an inference of agreement. The Court noted that “the Complaint points out that the Defendants had numerous opportunities to make such an arrangement by virtue of geographic proximity and the social and professional associations of the Defendants’ leadership structure.” [4]  Even more critically, the Court noted the Amended Complaint’s allegation that “Defendants released identical shelling contract price offers on the same day, year after year to take advantage of the Plaintiffs’ need to offload their harvested peanuts in the spring of each growing cycle.” [5]

The Court thus concluded that Plaintiffs “provid[ed] a motive…, connect[ed] defendants’ simultaneously issued priced offers to the broader context of the peanut market, and alleg[ed] efforts by the defendants to coordinate price offers and conceal their actual peanut inventory using peanut shelling trade associations.” [6]

The latest in a series of similar orders denying motion to dismiss antitrust class actions leveled against the food industry, the Court’s order reaffirms the principle that courts must consider the totality of factual assertions to determine whether a conspiracy has been plausibly alleged.

The Bilzin team will continue to monitor developments in the food and beverage antitrust sector.

 

[1] In re Peanut Farmers Antitrust Litigation, E.D. Va. Case No. 2:29-cv-00463, ECF No. 120 (Amended Complaint) at 1.
[2] Id. at 1-3.
[3]In re Peanut Farmers Antitrust Litigation, E.D. Va. Case No. 2:29-cv-00463, ECF No. 50 (Def. Golden Peanut’s Memo. in Support of its Motion to Dismiss) at 16-17; See also In re Peanut Farmers Antitrust Litigation, E.D. Va. Case No. 2:29-cv-00463,  ECF No. 50 (Def. Birdsong’s Memo. in Support of its Motion to Dismiss) at 4.
[4] In re Peanut Farmers Antitrust Litigation, E.D. Va. Case No. 2:29-cv-00463, ECF No. 135 (Memorandum and Opinion Order) at 6.
[5] Id.
[6] Id.

Work in the restaurant industry is a grind on a good day. Long hours, revolving staff, never-ending customer expectations, seasonality, supply chain issues, and intense competition are just a few of the daily headaches. As adept as restaurants have become at bracing for frequent storms, COVID-19 represents nothing short of their Hurricane Katrina. State and local orders issued in response to the global pandemic forced business closures nationwide—a paralyzing event from which some companies will never recover.

Many resilient restaurants have adapted quickly to new legal constraints by partnering with food delivery services to ramp up take-out and delivery options. Indeed, on-demand food delivery services like Uber Eats, Postmates, Grubhub, and DoorDash are about the only food-related business to benefit from the pandemic. In fact, with stay-at-home lifestyles becoming the potential new normal, financial forecasters are predicting a nearly $45 billion growth in that market between now and the end of 2024. [1] Restaurants that can continue to pivot to off-premise services like take-out and delivery options likely will see quicker returns to profitability.
Continue Reading Setting the Table in a Post-COVID-19 World: The Restaurant Industry Rises Up to Tackle Its Greatest Challenge Yet (and Maybe Ever)

Last week U.S. District Judge Phyllis J. Hamilton granted Ghirardelli’s Motion to Dismiss a proposed class action involving the chocolatier’s packaging of its white baking chips.

Filing their case in September of last year in California state court, the class plaintiffs alleged that the products were deceptively labeled because the use of the term “white” insinuated that the chips contained white chocolate when it, in fact, did not. Ghirardelli removed the case to federal court and moved to dismiss, arguing that the mere use of the word ‘white’ says nothing about whether the product is chocolate,” but rather simply describes the color of the chips.[1]

Continue Reading Putative Class Action Dismissed Over Ghirardelli White Chips

Pursuant to standard FDA regulations, retail restaurants with 20 or more locations doing business under the same name (and offering the substantially same menu) are required to provide nutritional information for standard menu items, including calorie information. But with state and local governments’ recent orders in response to the COVID-19 pandemic forcing restaurants to close their dining rooms and switch to take-out or delivery only, many restaurants are also being forced to make impromptu changes to their menu offerings. While these seemingly innocuous menu changes are relatively easy to implement under ordinary circumstances, labeling changes are far more difficult in the midst of a pandemic that has caused restaurants to struggle substantially on multiple levels.

Recognizing this reality, the FDA has acted quickly to temporarily reduce nutritional and menu labeling restrictions. Specifically, the FDA recently announced that it will not object to restaurants that do not meet the normal menu labeling requirements during the pandemic. These changes are meant to avoid food shortages, keep restaurants open, and avoid wasting food.

Continue Reading FDA Temporarily Relaxes Food Labeling Regulations

On March 19, 2020, Magistrate Judge Goodman recommended certifying a Florida class of purchasers of Prevagen, a memory-enhancement product developed by Quincy Bioscience, LLC.[1]  Plaintiffs’ complaint asserts that Quincy violated Florida’s Deceptive and Unfair Trade Practices Act (FDUTPA) by representing to consumers that Prevagen can improve memory function when that “cannot possibly be true as a matter of body chemistry.”

While the Plaintiffs in this case had not yet conducted discovery, they were able to rely on a robust record developed in a similar Prevagen class-action lawsuit against Quincy in California, where the class had been certified and gone to trial.  Quincy is also the current subject of government enforcement actions by the Federal Trade Commission and the New York Attorney General’s Office, and a defendant in four other Prevagen-related class-action lawsuits. Continue Reading Class Action Ascertainability in the Eleventh Circuit: What Makes the Cut?

When America’s war on heart disease was kicked into gear by President Eisenhower’s heart attack in 1955, dietary fat was deemed the culprit. In an effort to improve health, people sought low-fat alternatives to their favorite foods. The market reacted and “low fat” products began appearing. But over the last few years, nutritionists have increasingly blamed sugar and carbohydrates, rather than fat, for heart-health issues. Not surprisingly, product labeling and advertising evolved to address consumer perceptions. Products touting “reduced sugar” content or “no sugar added” became almost ubiquitous on supermarket shelves.

Continue Reading Consumers Allege Dishonesty from Honest Tea

As the CBD boom continues to gain a foothold in mainstream commerce, the Food and Drug Administration (FDA) has been slow to provide retailers and consumers with meaningful guidance or regulation.

On December 20, 2019—in response to prompting from Senate Majority Leader McConnell for FDA guidance on CBD regulation— the Further Consolidated Appropriations Act (the “Act”) (P.L. 116-94), was passed. The Act required the FDA to provide a report regarding its progress towards developing a policy for enforcement and use of CBD as an FDA-regulated product (the “Report”).

The Report—along with a public press release—was issued on March 5, 2020. While many CBD industry participants hoped the Report would provide substantive guidelines for safe manufacturing and distribution practices and approved uses, the Report lacked significant guidance. Indeed, the Report largely reasserts the position the FDA has taken in the more than 50 warning letters issued to CBD companies since 2015—namely, that CBD poses health risks, is not an approved drug, dietary supplement or food additive, and that retailers and manufacturers are not permitted to make unsubstantiated claims regarding the health benefits of these products.

While public safety and lack of definitive science continues to remain a top concern, the main take-away from the Report is that the FDA is seriously considering “potential pathways for certain CBD products to be marketed as dietary supplements.” Specifically, the Report notes the “FDA has the authority to create an exemption through notice-and-comment rulemaking [] that would allow products containing CBD to be sold legally as dietary supplements.”  While the rulemaking procedures contemplated are notoriously time intensive, the fact that the FDA has unveiled a strategy for working toward regulation is considerable forward progress.

The path for the use of CBD as a food ingredient remains less clear. The FDA reiterated that “[i]t is not currently lawful to add CBD to human or animal food.” However, the FDA remains open to changing its position as it continues to “encourage interested parties to continue to develop and share with the FDA information regarding whether there are conditions under which CBD could safely be added to food.”

While understandably anxious consumers and retailers must continue to wait for more definitive regulation and guidance, the Report is an encouraging sign that the FDA remains committed to creating a workable regulatory framework for the safe sale and consumption of CBD products. The Report acknowledges, for example, the “incredible amount of interest in CBD across a wide range of product areas” and the “significant interest in the development of therapies and other consumer products derived from cannabis and its components, including CBD.”  The FDA also confirmed it is “excited about potential new therapeutic uses for CBD that may be substantiated through further clinical study, as we are committed to doing all we can to encourage the development of CBD drug products and additional cannabis-derived drug products through existing, legal pathways.”

Until comprehensive guidance is available, manufacturers and retailers should continue to act conservatively and carefully by avoiding advertising claims related to health benefits. Stakeholders with scientific research on CBD’s health effects should also consider working with regulators by providing them with data needed to evaluate and approve CBD as an FDA regulated product.

The rapid spread of COVID-19 (also commonly referred to as “novel coronavirus”) has caused nations and organizations across the world to take emergency action in the interest of public health. Most companies are issuing statements advocating for consistent hygiene (handwashing and minimal face touching) aimed at containing the spread of the virus. Other companies are taking more aggressive action by instituting work from home policies and even travel bans.

The food industry is particularly susceptible to experiencing a duel impact from the global outbreak, both in terms of both domestic sales and supply chain disruptions. Many food manufacturers have foreign production facilities in China, Italy, and other locations where coronavirus has stalled the workforce, and in turn, the economies. And, because a timeline on a meaningful dissipation of the outbreak is so uncertain, manufacturers, distributors, and retailers must prepare to engage in significant deviations in their current approach, by considering diversions to alternative sourcing locations, and an increased focus on inventory management. For example, not surprisingly, grocery stores have seen a surge in demand for hand sanitizers, soaps, and other disinfectants, leaving many retails with empty shelves. Indeed, supply of these products is so scarce that recipes for “DIY” hand cleaners are being circulated by news and social media outlets.  Retailers that are able to meet that demand will benefit from increased foot traffic and overall sales.

Continue Reading A Recipe for Disaster: The Impact of COVID-19 on Food Safety and the Food Industry

U.S. District Judge Edmond E. Chang in the Northern District of Illinois recently granted certification in a wheat market rigging suit filed against Kraft Foods Group Inc. (“Kraft”). The class, comprised of Chicago Board of Trade (“CBT”) wheat market investors, alleges that Kraft artificially manipulated the wheat commodities market by taking sizable futures positions to influence prices.

Specifically, the class of investors alleges that Kraft purchased $90 million (15 million bushels) of December 2011 wheat futures contracts “in order to depress cash market wheat prices and inflate the futures price of wheat”. Plaintiffs claim Kraft’s behavior was suspicious considering Kraft had never before purchased such a substantial quantity of wheat and did not have adequate storage capacity for such a purchase.

Continue Reading Class Certification Granted to Kraft Investors Alleging Wheat Market Rigging