A Five-Step Recipe for Managing Your “Natural” Litigation Risk
Advice gleaned from consumer “natural” labelling class actions for food and beverage producers to consider for continued natural label use.
July 14, 2014
The past five years have brought a deluge of class actions challenging the way in which the word “natural” is used on food and beverage labels. Perhaps predictably so, this litigation phenomenon resulted from the convergence of countervailing market forces: the historic trend of increasing industrialization and efficiency in our food supply to get ever-greater yield from a shrinking supply of farmland, and the natural foods movement—emblemized by books such as The Omnivore’s Dilemma and Fast Food Nation—representing a revolution in consumer demand for healthier, more ecologically sustainable, more pastorally derived food products. Although certified organic and natural foods have become mainstream in response to consumer demand, there is no commonly accepted meaning of the term “natural.” The FDA—which frequently enacts bright-line definitions for common indefinite terms, like “healthy,” light,” and “low fat”—has declined to adopt any regulatory definition of the term, offering only an informal policy that it will does not object to foods being labeled “natural” unless they contain unexpected artificial or synthetic substances. The USDA’s policy, which applies to meat and poultry, also would object to artificial and synthetic ingredients, as well as to ingredients that are more than “minimally processed.” But there is no formal, regulatory definition of the term, and thus no singular meaning that the industry and consumers alike can ascribe to it.
In the shadow of the FDA’s regulatory inaction, a cottage litigation industry has developed, in which any “natural” label can be challenged in a class-action lawsuit seeking millions in damages because the product allegedly does not live up to the asserted meaning of the term “natural,” leaving judges and juries to decide the meaning of that term on a case-by-case basis. Recently, despite a request from a group of federal judges to act, the FDA repeated its refusal to create a formal definition of the term “natural. “ The FDA’s inaction means that food producers using a “natural” label cannot rely on regulatory intervention anytime soon—and that the question remains open for debate within our courtrooms.
But producers who want to use the term “natural” on their label are not powerless. Early results from labeling-litigation frontlines provide steps that, when followed correctly, can help producers manage litigation risk.
Step 1: Take Stock of Your Ingredients
Like any good recipe, the first step in the process is to take stock of all your ingredients to ensure you have what you need. In this situation, you must assess your risk of suit based on a sound understanding of your product’s ingredients and production methods, applicable FDA or USDA guidance, and knowing whether your product contains the types of ingredients that have been challenged under the “reasonable consumer” standard.
To begin, compare you ingredients against any applicable FDA or USDA guidelines, knowing that any “natural” designation that does not comply with the FDA or USDA policies is at the highest risk of being challenged in a class-action lawsuit. But reviewing and applying regulatory guidance is only the beginning. Again, because there is no formal regulatory definition, class-action plaintiffs are not limited by the regulatory guidance and are free to argue that “reasonable consumers” could have draw any number of expectations from a “natural” label. The most direct way to examine whether your “natural” label is at risk of such a claim is to consider the types of ingredients that have been challenged in other lawsuits under the “reasonable consumer” standard. These commonly challenged ingredients, in fact, fall into a number of categories.
- Artificial preservatives: At the highest end of the risk spectrum are artificial preservatives such as sodium benzoate and potassium sorbate, which would not be permitted in a “natural” food under the FDA’s informal policy.
- “Highly processed” ingredients: Highly processed food items and food processing techniques that fundamentally change an ingredient from its natural source consistently come under attack. Common ingredients include high fructose corn syrup (HCFS), ascorbic acid, high-maltose corn syrup, and xanthan gum. Many complaints involving these ingredients see dismissal at the pleading stage, but inconsistent results in this area continue to make these ingredients likely targets.
- Genetically modified (GM) ingredients: Many of the most recent “natural” lawsuits include challenges against foods that contain GM ingredients or are produced with bioengineering. The theory is that genetically modified crops do not occur in nature and that they contain recombinant DNA from other species. Among these ingredients, the highest risk would fall on ingredients that actually contain the protein or DNA material, such as milled corn products. At lower risk are those ingredients that are merely produced with GM substances, and have no GM components (e.g., milk from cows treated with recombinant bovine growth hormone).
Ultimately, in this environment, any “natural” label faces a non-trivial risk of litigation. But auditing your ingredients against both regulatory guidance and current litigation trends can help you understand where your product falls on that risk spectrum.
Step 2: Weigh Your Risk Tolerance against the Value of “Natural” to Your Brand
As a manufacturer, you must not only measure your litigation risks, but also the value of the “natural” labeling to your brand. If using “natural” is critical to your brand’s success, then you may be willing the risk of having to defend it in court. On the other hand, for example, if the naturalness of your product is already apparent enough without the “natural” label, you may find that even a slight risk of litigation is not worth taking.
Step 3: Simplify for Your Customers – Define or Modify “Natural”
You can help lower your litigation risk by clearly defining what you mean by “natural.” For example, you can place your definition on the packaging itself or reference the explanation that may exist on your website. In a recent federal court decision, the court based part of its dismissal of a “natural” class action because the “[d]efendant actively defines what its use of natural means, so that no reasonable consumer could be deceived.” Similarly, you could opt to qualify or modify the “natural” labeling to clear up potential confusion. Some examples include: “contains natural ingredients” and “no artificial ingredients.”
Step 4: Consider Appropriate Substitutions for Troublesome Ingredients
An additional solution that has grown in popularity is to rid your products of those problematic ingredients and replace them with reasonable alternatives. For example, substituting non-GM ingredients may be feasible, although depending on the ingredient you you may come across difficulties in obtaining identity-preserved non-GM ingredients. You will want to pull out the scale again here to weight the costs and benefits of this approach from a business and litigation standpoint.
Step 5: Use Counsel for Best Results
Food companies often overlook one of the most integral parts of the risk assessment process: working with an experienced attorney within the scope of the attorney-client privilege. By its own nature, a litigation risk assessment is a legal evaluation. Without a lawyer guiding you along the way, you may lose out on the ability to protect sensitive information, documents, and communications regarding the examination of your “natural” labelling. With a lawyer involved in the process, however, even communications between businesspeople for the purpose of facilitating counsel’s advice should be protected by the attorney-client privilege or work-product doctrine.
If you are considering an examination of your company’s “natural” label, involve counsel immediately. Have your attorneys supervise the process, and include them in every step along the way. Make sure that any documents you generate for this purpose is marked as attorney-client privileged, and that you only share those documents with members of a selected review team.
The “natural” class action litigation scene does not appear to be fading from view any time soon. It is important that you do what you can to protect your company against future lawsuits, as any use of the term “natural” potentially leaves your company open to costly class litigation, no matter how truthful and non-misleading you have made your labels. Taken together, the five steps listed above combine to create a recipe to help you manage your risk while savoring the value brought about by “natural” labeling.
 Balser v. Hain Celestial Group, Inc., No. CV 13-05604, 2013 U.S. Dist. LEXIS 180220, at *3-4 (C.D. Cal. Dec. 18, 2013).
 Long v. University, 204 F.R.D. 129 (S.D. Ind. 2001) (holding that emails between university employees regarding communications and legal advice from lawyer were privileged); Johnson v. Sea-Land Serv. Inc., No. 99 Civ. 9161, 2001 U.S. Dist. LEXIS 11447, at *4 (S.D.N.Y. Aug. 9, 2001) (“The attorney-client privilege affords confidentiality to communications among clients, their attorneys, and the agents of both, for the purpose of seeking and rendering an opinion on law or legal services, or assistance in some legal proceeding, so long as the communications were intended to be, and were in fact, kept confidential.”); FDIC v. Bryan, No. 1:11-cv-2790, 2012 U.S. Dist. LEXIS 189743, at *17 (N.D. Ga. Nov. 28, 2012) (“[T]he fact that the email was not directly to or from an attorney does not preclude application of the attorney-client privilege.”)
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