Executive Summary Complaints concerning food and beverage, dietary supplements, and cosmetics dominated civil class action complaint filings during the first and second quarters of 2014. This report analyzes class action complaints alleging unfair and deceptive acts and practices (“UDAP”) that were filed between January and June 2014 (the “period”). 1 The following are key findings concerning complaints filed during the period: A total of 102 UDAP class action complaints were filed, with 53 filed in the first quarter and 49 filed in the second quarter. The rate of complaint filings were highest in January, March, and May. While suits were filed against defendants in fourteen industries, more than half of the complaints were against the food and beverage (36%), dietary supplement (12%), and cosmetics (11%) industries. There was a significant increase (+10) in the percentage of complaints filed against companies in the food and beverage industry from the fourth quarter of 2013 to the first quarter of 2014. That percentage increased again (+1) from the first quarter to the second quarter of 2014. Litigation in the cosmetics industry increased in both quarters, and the retail industry also had a net increase over the prior period. Even though the dietary supplement industry remained one of the top three industries UDAP complaints were filed against, there has been a steady decrease in the percentage of complaints filed against dietary supplement makers and distributors. The percentage of complaints filed against retailers remained the same from the fourth quarter of 2013 to the first quarter of 2014, but increased (+6) from the first quarter to the second quarter of 2014. Although the complaints alleged a wide variety of legal theories, food labeling and/or nutrition content claims (26%), performance claims (18%), and “natural” claims (18%) were included in nearly two-thirds of the complaints. While complaints were filed in state and federal courts across the country, the most popular federal forums for plaintiffs were the Northern District of California (21%), the 1 For an analysis of UDAP class action complaints filed 2013, see Goldman and Zetoony, Managing Legal Risks: Trends in Advertising Class Action Litigation (2013 Year-In-Review).Page 3 of 9 Southern District of California (9%), and the Central District of California (8%). The most popular state court forum was California (20%). Part 1: Volume of Litigation A total of 102 complaints were filed during the period, with complaint filings remaining fairly constant between the first and second quarter. Spikes in complaint filings were seen in January, March and May. Volume of Complaint Filings by MonthPage 4 of 9 Part 2: Litigation By Industry While companies across fourteen industries received complaints, the highest concentration of complaints was in the food, dietary supplement, and cosmetic industries. The period did see a rise in complaints filed against the food industry, which accounted for 36% of the complaint volume. The following chart provides a breakdown of UDAP complaints by the industry in which the defendant operates. Percentage of Complaints by Defendant Industry 2 2 Category names and percentages are not includes for the following industries that received less than 3% of complaint volume: Automotive (2%); Sports (1%), and Sports Equipment (1%).Page 5 of 9 Although it is difficult to draw conclusions based upon changes in any one quarter, there are a number of directional shifts that suggest changes in the industries targeted by consumer class action plaintiffs throughout the year so far. The directional chart below shows some key changes in a selection of industries. Industry Q4 2013 Q1 2014 Q2 2014 Change from Q4 2013 to Q1 2014 Change from Q1 2014 to Q2 2014 Cosmetics 7% 8% 14% +1 +6 Dietary Supplements 19% 15% 10% -4 -5 Food and Beverage 26% 36% 37% +10 +1 Pharmaceutical 3% 13% 2% +10 -11 Retail 6% 6% 12% No change +6 Weight Loss 3% 4% 4% +1 No change Part 3: Primary Legal Theories The vast majority of UDAP class action complaints filed during the period related to food labeling and/or nutrition content (26%), followed by claims related to a product’s performance (18%), and complaints regarding claims that a product was “natural” (18%). The following chart provides a breakdown of the primary basis upon which the complaint alleged a UDAP violation. For purposes of this diagram, if a complaint included more than one legal theory (i.e., lack of substantiation and a performance claim), the legal theory that was predominantly discussed in the complaint has been included in the chart. Page 6 of 9 Class Action UDAP Complaints by Category of Claim3 Part 4: Favored Courts While complaints were filed in twenty-four different courts during the period, California courts again dominated both state and federal filings. Among federal courts, the Northern District of California (21%) received the most complaints, followed by the Southern District of California (9%) and the Central District of California (8%). Among states, California (20%) also received the most complaints. Outside of California, the Southern District of Florida (7%), the Eastern District of New York (6%), and the Northern District of Illinois (5%) received the most complaints. The following chart provides a complete breakdown of the courts in which complaints were filed during the period. 3 Category names and percentages are not includes for the following categories that received less than 3% of complaint volume: Auto renewal (2%), Made in the USA (2%), Retail Product Labeling (2%), Data Privacy (1%), Manipulating Market Price (1%), and Trial Offer (1%).Page 7 of 9 Courts in Which Complaints Were Filed 4 4 The chart does not show names or percentages for any court receiving less than 3% of complaint volume. Such courts include: Western District of Arkansas (1%), Eastern District of California (2%), District of Connecticut (1%), Northern District of Florida (2%), Southern District of Illinois (1%), Illinois Circuit Court (1%), District of Maryland (2%), Eastern District of Missouri (1%), District of Nevada (2%), District of New Jersey (2%), Southern District of New York (2%), New York Supreme Court (1%), Northern District of Ohio (2%), Western District of Washington (1%), Washington Superior Court (1%), and Eastern District of Wisconsin 1%).Page 8 of 9 Part 5: Methodology Complaints included within the data analyzed by the report were identified by the Advertising Disputes and Litigation (“ADL”) Committee of the Antitrust Section of the American Bar Association. 5 The numbers and percentages in the accompanying charts are approximate and are rounded up or down to the nearest whole percentage.