Class actions for exaggerated health claims on the rise: report

Class actions for exaggerated health claims on the rise: report

Defence lawyers in Canada are sounding the alarm over a surge in class actions in the United States related to food and health claims — a trend beginning to creep its way north of the border.

Lawyers in the food products group at Osler Hoskin & Harcourt LLP issued their warning in a report published yesterday entitled “Food Product Liability in Canada: Five drivers of litigation and steps to minimize the risk.”

The report points to the growing number of cases against food and beverage manufacturers, like Campbell’s Soup and Coca-Cola, for health claims that, until recently, hadn’t elicited much interest from plaintiffs’ lawyers.

This new breed of class action goes far beyond “failure to warn” cases where manufacturers are accused of keeping customers in the dark over health concerns. Now, in an age of heightened health consciousness, plaintiffs’ lawyers are going after companies for health claims perceived to be misleading.

Sonia Bjorkquist, who co-authored the piece along with Deborah Glendinning, Craig Lockwood, and Michael Innes, says Canada is vulnerable to copycat litigation.

“We’ve been keeping a close eye on the surge in U.S. litigation,” she says. “It’s not surprising, when a case is commenced in the U.S., that plaintiffs’ lawyers north of the border, often teaming with U.S. lawyers, can bring similar claims up here.”

In particular, companies need to be careful making claims about ingredients or health attributes. Words like “all-natural” or exaggerated claims about beverages containing “real fruit juice” have now come under greater scrutiny.

“Previously words like ‘natural’ were effectively unregulated,” says Lockwood, “and people would use them fairly loosely. In today’s environment we have a heightened warning culture. People are a lot more sensitive to these things, and there’s a lot more at stake in terms of potential exposure for liability.”

The report points to one such case involving a beverage called Naked Juice. PepsiCo, which owns the brand, paid a $9-million settlement in a class action challenging its use of the terms “all natural” and “non-GMO.”

As part of the settlement, the company not only had to reimburse customers and redesign its labels, but also develop a product-verification program and ingredient-tracking database costing hundreds of thousands of dollars.

And it’s not only class actions that manufacturers have to worry about — competitors, too, are suing each other for exaggerated claims.

“POMWonderful is a great example, suing Coke over their pomegranate-blueberry-flavoured blend, where there was actually a very small percentage of fruit juice in there,” says Bjorkquist.

Following regulations closely and making full regulatory disclosures will go a long way to protecting the company, but Bjorkquist warns even abiding by regulations will not prevent class actions where companies are accused of being aware of regulatory deficiencies.

“It can be very helpful to defendants to show full and accurate disclosure when dealing with the regulatory authorities,” she says, “but I don’t think it’s been a bar to ligitation proceedings.”

Food product manufacturers can even get caught up in litigation when alleged misrepresentations are made by a third party on behalf of the manufacturers, as in the case of endorsements.

Oslers’ report, for example, points to a class action against the American Heart Association, where Campbell’s Soup was also named just for being endorsed.

“It seems odd that you could go after the consumer [product manufacturer] and say, ‘Well, the criteria that [the American Heart Association uses] are unsatisfactory and therefore we’re coming after you as well.’ But I think it just shows the buckshot approach,” says Lockwood.

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