Last week, a federal judge in New Jersey denied Campbell Soup’s motion to dismiss consumer fraud claims brought by a purported nationwide class of consumers who purchased soup labeled as having “25% less sodium.” The decision is notable for two main reasons. As a threshold matter, the court found that the plaintiffs’ claims alleging misleading nutritional claims are not preempted by the Federal Food, Drug, and Cosmetic Act (FDCA). The decision further erodes the preemption defense, which has served as the first line of defense for labeling claims.
The decision also is notable because the court details rules that food companies must follow for comparison advertising and labeling. The court explained that when making comparison labeling claims, food companies must use appropriate reference foods, must identify the reference food in close proximity to the health claim and must not use reference foods in a way that is misleading. On this last factor, the court stressed that “the fact that the labels were literally true does not mean they cannot be misleading to the average consumer.” The court also noted that food companies are required to provide specific information upon which the nutrient value of the reference foods was derived, on request, to consumers.
Based on these rules, the court found that Campbell Soup’s claim that its soup has “25% less sodium” was misleading because Campbell Soup failed to use an appropriate reference food. The court found that Campbell Soup’s labels and advertisements were misleading because consumers could be misled into thinking that the soup had 25% less sodium than Campbell Soup’s regular tomato soup.
This decision will likely lead to increased consumer class action lawsuits based on alleged misleading nutritional labels. Food companies should heed this decision as an opportunity to re-examine nutritional labeling claims. The decision would apply to claims regarding not only sodium, but also fat, cholesterol, carbohydrates, sugar and nutrients. When making comparison claims, food companies must carefully select reference foods in accordance with federal regulations. As the court made clear, just because a labeling claim may be literally true does not mean that the label may not violate federal regulations or give rise to consumer litigation.
For companies that end up defending similar lawsuits, the decision counsels in favor of implementing new strategies to defend class claims. Defendants can no longer rely solely on the preemption doctrine. While the Campbell Soup decision is troubling in many ways, it is unclear whether the court will allow the case to proceed as a class action. In fact, some of the court’s observations actually suggest that the plaintiffs face significant hurdles to certifying a class, namely on the issue of causation. Defendants should be advised to challenge class claims on issues of reliance, causation and the applicability of the claims alleged to the entire class. While reliance is not an element under the New Jersey Consumer Fraud Act at issue in the Campbell Soup case, it is an element of many other consumer fraud statutes. The vast majority of courts hold that reliance is an individual issue that predominates over common issues of fact and law. As such, courts refuse to allow cases to proceed as class actions where reliance is a required element. Causation, which is a required element of all consumer fraud claims, also has been held to be an individualized issue that precludes class action treatment. In addition, because out-of-state consumers lack standing under most consumer fraud statutes, plaintiffs in most cases will be unable to proceed as a single nationwide class. Courts have held that a single action involving claims under multiple consumer fraud statutes is unmanageable. These are arguments that are often ignored or not advanced until after the dismissal stage. The federal rule allowing class actions requires courts to determine class issues at “an early practicable time.” Defendants would be well advised to focus their efforts on challenging class allegations earlier at the dismissal stage