The dawn of enforceable mandatory nationwide menu labeling crept closer on April 1, 2011, when the FDA issued proposed rules to implement the menu labeling requirements passed by Congress as Section 4205 of the Patient Protection and Affordable Care Act of 2010 (“Section 4205”).1 In addition to imposing a heavy regulatory burden on covered restaurants, Section 4205 is likely to spawn consumer class action litigation alleging claims of false or misleading menu labeling.
That Section 4205 would give rise to consumer litigation is counterintuitive given that there is no private right of action for violations of Section 4205 and it expressly preempts contrary state law. Although consumers are not permitted to bring direct claims at the federal level given the lack of a private right of action, claims under state law may still be possible notwithstanding the preemption provisions of Section 4205.
Creative lawyers have proven adept at sidestepping express preemption to bring consumer class action claims in the highly analogous food labeling context. Restaurants facing menu labeling litigation will therefore need to be prepared to advance a multi-layered defense that includes, but does not rely exclusively or even primarily upon, preemption. The following provides a brief overview of Section 4205 and the recent developments in preemption doctrine, and then sketches the broad outlines of an effective litigation defense strategy against consumer class action claims in the age of mandatory menu labeling.
Overview of Section 4205
Prior to passage of Section 4205, a handful of states ― notably New York and California ― enacted mandatory menu labeling laws, and many other states were actively considering such laws. Congress passed Section 4205 in 2010 in response to the public health crisis brought on by over consumption of calories and rising obesity rates, and, in part, to bring national uniformity to menu labeling requirements for larger chain restaurants and similar food retail establishments. The FDA issued proposed regulations on April 1, 2011 that would implement the menu labeling requirements of Section 4205.
Section 4205 sets forth menu labeling requirements for “standard menu items” offered for sale by “covered establishments.” The FDA has proposed definitions for both of those key terms. First, the FDA proposes that “covered establishment” means a restaurant or similar retail food establishment that is (1) part of a chain of 20 of more locations (2) doing business under the same name (regardless of the type of ownership of the locations) and (3) offering for sale substantially the same menu items. The FDA would interpret “restaurant or similar retail establishment” to mean an establishment that offers for sale restaurant or restaurant-type food and either (a) publicly presents itself as a restaurant or (b) dedicates more than 50% of its floor space to the sale of food. That definition would encompass traditional restaurants, coffee shops and snack bars, but exclude movie theaters, amusements parks, hotels, trains and airplanes. The FDA would interpret “substantially the same menu items” to mean items that use the same general recipe and are prepared substantially the same way using substantially the same ingredients, even if the item has different names at different locations.
Second, the FDA proposes that the term “standard menu items” means a food that is routinely listed on a menu or menu board or that is routinely offered as self-service food or food on display. “Standard menu items” would not include such things as custom orders, daily specials, food that is part of a customary market test, and temporary menu items.
For standard menu items, covered establishments must provide the following information:
- On a menu or menu board, the number of calories contained in each standard menu item as usually prepared and offered for sale. The FDA has tentatively concluded that “menu or menu board” includes any writing of the covered establishment that is the “primary writing” from which the consumer makes an order selection. For menu items that come in different flavors, varieties or combinations but are listed as a single menu item, the FDA proposes that the number of calories be declared as a range.
- A succinct statement concerning the suggested daily caloric intake posted on a menu or menu board designed to enable the public to understand in context the significance of the calorie information provided for individual standard menu items. The FDA has tentatively concluded that 2,000 calories is an appropriate daily intake, and that a statement such as the following would be appropriate: “A 2,000 calorie daily diet is used as the basis for general nutrition advice; however, individual calorie needs may vary.”
- Additional nutrition information for standard menu items in a written form which must be made available on the premises to customers upon request. There must be a “prominent, clear, and conspicuous” statement on the menu or menu board regarding the availability of the additional information. To that end, the FDA proposes that restaurants use the statement: “Additional nutrition information available upon request.” The additional information must include the total number of calories from any source, the number of calories derived from total fat, and nutrient information regarding total fat, saturated fat, trans fat, cholesterol, sodium, total carbohydrates, sugars, dietary fiber and protein.
- The number of calories (per item or per serving) on a sign adjacent to self-service food and food on display, such as food sold at salad bars, buffet lines, cafeteria lines or similar self-service facilities.
In addition to its substantive provisions, Section 4205 expressly preempts “any requirement for nutrition labeling of food that is not identical to [its] requirement[s].”2 Addressing the preemptive effect of those requirements, the regulations explain that “States and local governments may not impose nutrition labeling requirements for food sold in restaurants and similar retail food establishments that must comply with the Federal requirements of [Section 4205] unless the State or local requirements are identical to the Federal requirements.”3 Section 4205 does not preempt state and local menu labeling regulations as applied to restaurants with fewer than twenty locations and establishments (such as movie theaters, schools and hospitals) that sell food but are not within the scope of Section 4205 as interpreted by the FDA. Establishments that are not covered by Section 4205 may voluntarily elect to comply with its requirements and take advantage of its preemption provision.
The Limited Scope of Preemption Under Section 4205
While seemingly broad, Section 4205’s preemptive scope leaves significant room for state regulation of menu labeling via consumer lawsuits. In recent years, courts have taken an increasingly restrictive view of the preemption defense. In Bates v. Dow Agrosciences LLC, 125 S.Ct. 1788 (2005), the Supreme Court held that an express preemption provision which provides that a “State shall not impose or continue in effect any requirements for labeling or packaging in addition to or different from those required under” federal law did not preempt state law labeling requirements that are “equivalent to, and fully consistent with” that law. Three years after deciding Bates, the Supreme Court reaffirmed the vitality of the traditional “presumption against preemption” and rejected the implied preemption defense in two cases, Altria Group v. Good, 555 U.S. 70 (2008), and Wyeth v. Levine, 555 U.S. 555 (2009), involving consumer state law tort claims.4 The net effect of these developments is to significantly restrict the availability of the preemption defense in cases ― such as food labeling cases ― where the interests of states in protecting consumers is strong.
In the wake of Bates, Altria, and Wyeth, a growing body of food labeling cases have arisen in which courts have frequently, although not uniformly, ruled against defendants seeking to employ the preemption defense. For example, in Lockwood v. Conagra Foods Inc., 597 F. Supp. 2d 1028 (N.D. Cal. 2009) and Holk v. Snapple Beverage Corp., 575 F.3d 329 (3d Cir. 2009), courts rejected preemption defenses against state law claims that “All Natural” labeling was misleading when used on products containing high fructose corn syrup (HFCS). In both cases, the courts rejected both field and conflict preemption arguments, and found non-preemptive a long-standing FDA policy that defined “natural” in a way that would encompass HFCS. Courts have also been slow to find express preemption in food labeling cases. In In re Farm Raised Salmon Cases, 175 P.3d 1170 (Cal. 2009), the California Supreme Court, citing to Bates, held that consumers could bring suit for violations of the Federal Food Drug and Cosmetic Act (FDCA) using state law causes of action that incorporate requirements identical to those of the FDCA. The upshot of In re Farm Raised Salmon and similar cases is that consumers may circumvent express preemption by bringing state law claims that seek to enforce requirements that track identically with federal requirements.
Lessons for the Coming Menu Labeling Cases
Much like they have in food labeling cases, enterprising plaintiffs will likely find ample opportunities to bring consumer litigation consistent with federal menu labeling standards that will avoid federal preemption. In light of this reality, the lesson for restaurant owners and operators is clear: defense of consumer litigation must not be primarily dependent upon federal preemption, but instead must involve multiple and layered defenses. These defenses should include, in addition to preemption, removal under the Class Action Fairness Act (“CAFA”), challenges to the pleadings under Rule 12(b)(6), and aggressive but limited class discovery involving both fact and expert witnesses.
CAFA relaxes the requirements for removal for defendants in class actions. Removal is generally proper under CAFA in cases involving at least 100 class members and $5 million in controversy when any class member is diverse from any defendant. See 28 U.S.C. § 1332(d). Restaurateurs facing consumer class actions in state courts should strongly consider removing actions to federal courts where class action rules are well-defined and frequently more favorable to defendants. Once in federal court, defendants should give strong consideration to challenging the pleadings under Rule 12(b)(6) in light of the Supreme Court’s rulings in Bell Atlantic Corp. v. Twombly, 550 U.S. 544 (2007) and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009), tightening the federal pleadings standards. While complete dismissal is not always possible, a strategic motion to dismiss can frequently narrow the issues and scope of liability in a case.
Finally, aggressive class discovery, including deposition of class representatives and use of expert testimony, is essential to lay an adequate groundwork for a successful opposition to class certification. Discovery has become particularly important in light of courts’ increasing willingness to scrutinize all of class plaintiffs’ evidence, including expert evidence, to determine whether plaintiffs have met their burden to establish each Rule 12 class certification requirement by a preponderance of the evidence. Indeed, in one notable example, the defendant secured denial of class certification after the court granted its motion to strike the plaintiffs’ damages expert. Weiner v. Snapple Beverage Co., 07-cv-8742, 2010 WL 3119452 (S.D.N.Y. Aug. 5, 2010). Denial of class certification in that case was quickly followed by a complete summary judgment in favor of the defendant. Weiner v. Snapple Beverage Co., No. 07-cv-8742, 2011 WL 196930 (Jan. 21, 2011).
Clearly, compliance with the new menu labeling requirements once the implementing regulations have been finalized and the period for implementation has passed is a critical component of an overall strategy to protect from menu labeling claims by consumers (as well as regulatory actions). Whatever form the final regulations take, implementing the requirements will be no small task, especially for large franchised restaurant chains. Practical issues such as how the required information will be incorporated into the menu structure (and updated when required), the source of the information used and related accuracy issues, and how franchisee training and compliance will be monitored will need to be carefully thought through by restaurant companies’ legal, marketing, training and other departments.
While bringing some uniformity to menu labeling nationwide, Section 4205 will likely do little to discourage consumer class action litigation alleging menu labeling claims. Moreover, the recent trend against preemption defenses, particularly in the food labeling space, counsels against heavy reliance on preemption in future menu labeling cases. In light of this fact, when facing the inevitable consumer class action lawsuit alleging menu labeling claims, restaurateurs and their counsel should carefully plan a layered defense that will provide multiple opportunities to derail such wasteful and oftentimes frivolous litigation.