Canadian food and beverage manufacturers should take note of Sandoff v. Loblaw Companies Ltd., (“Sandoff”) a recent Saskatchewan Court of Queen’s Bench (“SKQB”) class action case concerning allegedly deceptive food labelling practices.
In Sandoff, the representative plaintiffs (the “Plaintiff”) issued a claim under Saskatchewan’s Class Actions Act, seeking to recover damages on behalf of “all persons in Canada who, on or after the [relevant date] purchased Diet Cola, Low Sodium, Caffeine Free or PC Club Soda, Low Sodium (collectively the “Low Sodium Beverages”) from Loblaws in Canada.”
The Plaintiff argued that Loblaws application of a “low sodium” label to the Low Sodium Beverages was deceptive and misleading because the sodium content of the Low Sodium Beverages is “similar to, if not greater than, the sodium content of other regularly packaged products [which] do not include a low sodium label.” The Plaintiff alleged, among other things, that the “low sodium” label therefore constituted a breach of section 5(1) of the Food and Drugs Act (“Section 5.1”) which states that:
No person shall label, package, treat, process, sell or advertise any food in a manner that is false, misleading or deceptive or is likely to create an erroneous impression regarding its character, value, quantity, composition, merit or safety.
The Sandoff case mimics the growing trend of “food labelling” class actions in the United States. More than 102 of these cases were brought in U.S. federal court in 2012 alone, and several of these have proven expensive to the defendants. For example, in January of 2012 Nutella paid $3 million to settle a class action suit alleging that consumers were misled by Nutella’s claim that the spread is “an example of a tasty yet balanced breakfast.” The plaintiffs argued that Nutella’s claim was deceptive because it omits that a “balanced breakfast” is derived from the other food or drink depicted on the Nutella label, and not from the Nutella itself.
Similarly, in 2011 the Campbell Soup Company (“Campbell’s”) paid $1.05 million to settle a lawsuit respecting its “25% less sodium” tomato soup (the “Low Sodium Soup”). Campbell’s sold the Low Sodium Soup at a premium price despite the fact that it contained the same amount of sodium per serving as Campbell’s regular tomato soup. In response to the Plaintiff’s claims, Campbell’s argued that the 25% claim was not based on a comparison between the Low Sodium Soup and Campbell’s regular tomato soup, but rather with a range of its regular soups. U.S. District Judge Jerome Simandle denied a motion to dismiss the case, saying that reasonable consumers could be expected to find Campbell’s claims misleading.
In Sandoff, there were two applications at issue, namely Loblaws application for summary judgement and the Plaintiff’s application for certification of the proposed class action. Loblaws submitted that the case was suitable for summary judgment prior to certification because the materials facts were not in dispute between the parties and Justice Keene’s determination of a single legal issue would decide whether the Plaintiff had a “tenable” cause of action. Agreeing with Loblaws that “the only issue in the action was whether a reasonable customer would be misled by a “low sodium” beverage label, Justice Keene focused on the question of whether it was appropriate to grant summary judgment prior to certification.
After noting that it is very unusual for summary judgment to be appropriate in the class action context, Justice Keene concluded that Loblaws’ motion constituted an exception to that rule and granted its application for summary judgment. Justice Keene confirmed that the test of summary judgment in Canada is: (i) whether a genuine issue exists; and (ii) if a genuine issue does exist, whether its resolution requires a conventional trial. In Sandoff, the “genuine issue” for trial was whether or not it is misleading to label identical products differently. Its resolution did not require a conventional trial because:
- the Plaintiff failed to show a genuine ability to prove one or more factual elements to a legal cause of action;
- the Plaintiff’s claim against Loblaws lacked legal merit; and
- Loblaws had an obvious defence to the Plaintiff’s claim.
Applying an objective reasonable person test, Justice Keene found that the Loblaws’ “low-sodium” labelling was not false, misleading, or deceptive because the Low Sodium Beverages, were, as a factual matter, low in sodium. Therefore, Loblaws had an obvious defence (truth) to the Plaintiff’s claim. Moreover, Justice Keene found that a reasonable consumer “could have checked the nutritional labels….to read the sodium levels and [use] their own common sense to make informed decisions.” Justice Keene also noted that the Plaintiff had failed to present evidence that it, or any member of the proposed class, suffered any damages as a result of purchasing the Low Sodium Beverages. Justice Keene concluded that the Plaintiff had failed to show a genuine ability to prove one or more factual elements of a breach of Section 5.1 by Loblaws. Justice Keene therefore granted Loblaws’ application for summary judgment.
Defendants should note that Justice Keene’s decision to grant Loblaws’ application for summary judgment prior to hearing the Plaintiff’s certification application meant that only the representative plaintiffs are bound by the dismissal. Any other member of the proposed class could theoretically bring the same suit against Loblaws in the future. Defendants should consider this in deciding whether to seek summary judgment prior to certification.