Ghirardelli Settles “White Chocolate” Labeling Suit for $5.25 Million

White-Chips

Ghirardelli Chocolate Co. has agreed to pay approximately $5.25 million to resolve a putative class action that accused the company of improperly advertising certain products as containing “white chocolate” when they failed to contain cocoa butter, which is required for “white chocolate” or “white chocolate flavor” under FDA regulations.  A motion for preliminary approval of the proposed class settlement was filed on August 20th, with the settlement also providing that Ghirardelli make certain changes to its labeling.

Notably, the front labels for all of the targeted products, listed below, include the company name, Ghirardelli Chocolate, as shown in the above image:

a. Ghirardelli® Chocolate – Premium Baking Chips- Classic White,
b. Ghirardelli® Chocolate – White Chocolate Flavored Confectionary Coating Wafers,
c. Ghirardelli® Chocolate – Sweet Ground White Chocolate Flavor,
d. Ghirardelli® Chocolate – Premium Hot Beverage- White Mocha, and
e. Ghirardelli® Chocolate – Frappe Classico – Classic White

However, none of these products are specifically identified as “white chocolate,” in contrast to many other Ghirardelli products that include real coca butter.  Plaintiffs nevertheless argued that, for a variety of reasons, the labels were inconsistent with FDA regulations and that labels are misleading because consumers would reasonably believe that the products include “white chocolate.”

For example, the packaging of the [Classic White Baking Chips] prominently uses the term”chocolate” in the company name “Ghirardelli® Chocolate.”  It refers to the product as “Classic White” to deceptively mislead consumers into believing that it is classic white chocolate.  It states that the product is “Premium” leading consumers to incorrectly believe that, unlike its competitors, the product is a premium white chocolate chip product.  It then goes on to deceptively state [on the reverse]: “The luxuriously deep flavor and smooth texture of Ghirardelli Premium Baking Chocolate delivers the ultimate chocolate indulgence.”  But because there is no chocolate or white chocolate in Defendants’ chips, the product cannot deliver a “deep chocolate flavor or texture” or the “ultimate chocolate indulgence.”  The label further says [on the reverse] that the product contains the “Finest grind for smoothest texture and easiest melting” but in fact, unlike real white chocolate, the product is not “ground” from cocoa beans.

Per Law360, Ghirardelli stands behind the accuracy of its labeling and marketing but “opted to settle the suit to avoid the ‘expense and distractions’ of litigating what it believes to be ‘nuisance allegations.'”

This case highlights the dangers of including regulated terms in a company name/trademark and the need to scrutinize marketing language across product lines.  In this regard, in evaluating the risk of a lawsuit, the question is not whether you believe that reasonable consumers are misled by a label, but whether a colorable argument exists that consumers might be misled (thus creating the risk of a colorable lawsuit).  

Courts Continue Staying or Dismissing Evaporated Cane Juice Cases on Primary Jurisdiction Grounds

Numerous labeling class action suits were spawned by the FDA’s 2009 draft guidance advising that, in the FDA’s view,  “the term ‘evaporated cane juice’ is not the common or usual name of any type of sweetener, including dried cane syrup.”   Plaintiffs generally cite this draft guidance, and FDA warning letters citing the guidance, as indicating the FDA’s view that “evaporated cane juice” (ECJ) is false and misleading and violates regulations that ensure labeling with common ingredient names.  But on March 4, 2014, the FDA reopened the comment period on this guidance and announced its intent, following review of the comments, to “revise the draft guidance” and “if appropriate, … issue it in final form.”

Not surprisingly, this announcement prompted defendants in these class action suits to assert the primary jurisdiction doctrine as a basis for dismissing or staying the lawsuits.  This doctrine was recently asserted in the context of natural claims with varying success until the FDA dispelled any notion that it might define “natural” in the near future or in the context.

This time, the courts have been very receptive to the argument.  To date, the following putative class actions over evaporated cane juice (“ECJ”) have been stayed or dismissing without prejudice in light of the FDA’s pronouncement:

  • Gitson v. Clover Stornetta Farms, No. 13-cv-01517, 2014 WL 2638203 (N.D. Cal. Jun. 9, 2014) (yogurt);
  • Swearingen v. Late July Snacks LLC, No. 13-cv-4324, 2014 WL 2215878 (N.D. Cal. May 29, 2014) (crackers and chips);
  • Swearingen v. Yucatan Foods, L.P., No. 13-cv-3544, 2014 WL 2115790 (N.D. Cal. May 20, 2014) (guacamole);
  • Avila v. Redwood Hill Farm & Creamery, Inc., No. 5:13-cv-00335, 2014 WL 2090045 (N.D. Cal. May 19, 2014) (yogurt);
  • Swearingen v. Attune Foods, Inc., No. C 13–4541 SBA, 2014 Wl 2094016 (N.D. Cal. May 19, 2014) (cereal and probiotic bars);
  • Figy v. Lifeway Foods, Inc., No. 13-cv-04828, 2014 WL 1779251 (N.D. Cal. May 5, 2014) (kefir);
  • Figy v. Amy’s Kitchen, Inc., No. 13-cv-03816, 2014 WL 1379915 (N.D. Cal. Apr. 9, 2014) (variety of food products).

And just recently, over the past 7 days, two additional cases have followed the exact same reasoning on this issue:

  • Gitson v. Trader Joe’s Company, No. 13-cv-01333 (N.D. Cal. Aug. 8, 2014): Staying case and observing that, “b]ecause the FDA appears to be actively considering the lawfulness of the use of the term ‘evaporated cane juice’ on food labels, it makes sense to stay the plaintiffs’ evaporated cane juice claims to see if the agency does, in fact, issue final guidance on the issue.  Several other courts in this district have done the same.”  
  • Saubers et al. v. Kashi Co., No. 3:13-cv-00899 (S.D. Cal. Aug. 11, 2014): Dismissing case without prejudice and stating that “[a]llowing the FDA to resolve this matter in the first instance would permit the court to benefit from the agency’s technical expertise and would also provide for uniformity in administration of the agency’s food labeling requirements.”

The agreement by the courts on this issue is not surprising given the strong reliance placed by plaintiffs on the FDA draft guidance and associated warning letters regarding ECJ.  Such reliance is necessary because ECJ is simply a listed ingredient on the nutrition facts label and that label also includes the total sugars in the product.  These claims thus differ from most other labeling class actions because they generally do not encompass allegedly misleading statements on the front of the product that tend to make irrelevant the nutrition facts label on the back of the product. See Williams v. Gerber Products Co., 552 F.3d 934, 939 (9th Cir. 2008) (“reasonable consumers should [not] be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list[]”).

Duke v. The Duke: Trademark Dispute Over Alcoholic Beverages

Duke University and John Wayne Enterprises, Inc. (“JWE”) are engaged in trademark litigation over the “Duke” trademark in connection with alcoholic beverages.  JWE is operated by John Wayne’s descendents and enters into licenses and partnership agreements with respect to the name and likeness of John Wayne.  The dispute arose when Duke opposed trademark applications filed by JWE for “Duke” and “Duke John Wayne” in connection with alcoholic beverages except for beers.  In its oppositions, Duke University alleged that JWE was seeking trademarks substantially similar to the university’s “famous mark … for goods that are closely related to goods and services with which” Duke uses its DUKE marks.  Accordingly, Duke asserted that the applications should be rejected because the applied-for marks were likely to cause confusion and/or dilution with respect to Duke’s trademarks.

JWE was apparently so taken aback by Duke’s position that it filed a complaint for declaratory judgment with the U.S District Court for the Central District of California.   Specifically, it asserted that it feared that Duke University “intends to sue JWE for trademark infringement” and it therefore “seeks a judicial declaration of no likelihood of confusion and nondilution to remove that cloud.”  JWE calls Duke’s position “ludicrous” and noted that the DUKE bourbon sold under license features John Wayne’s signature, an image of a shotgun casing and the words “Kentucky Straight Bourbon Whiskey Small Batch.”

From Duke University’s perspective, they are doing what most companies (or universities) would do in their position — they are exercising their affirmative duty to police their trademarks by objecting to the registration of a substantially similar mark.  After all, Duke University uses its mark on a wide variety of products and those marks can be weakened if there are lots of other “Duke” marks on the trademark registry.  JWE’s position is equally rationale.  It does not believe its “Duke” mark, as specifically used on its products in connection with John Wayne and especially on alcoholic products, could ever be confused with Duke University.

See complete copy of the complaint here.

The Supreme Court’s Lesson on Labeling – My Article for Food Processing Magazine

I have written an article for Food Processing magazine regarding the Supreme Court’s decision in POM Wonderful v. Coca-Cola.  It is available on-line here.

Consumer Reports Petitions FDA/USDA to “Prohibit the Use of the ‘Natural’ Label on Food”

Consumer Reports is sponsoring a petition to the FDA and USDA to prohibit use of “natural labeling” on food products.  Consumer Reports believes such labeling is misleading because it is used on products that most consumers would not view as “natural.”

Even though the Food and Drug Administration does not object to the use of the term “natural” if “nothing artificial or synthetic” is added, there’s no definition for the term, which essentially means no regulation and no oversight.  As a result, “natural” processed foods can include ingredients from nature that are processed into artificial ingredients and may also come from plants grown with toxic pesticides, bioengineered seeds, and chemicals processed with synthetic solvents.  Meat labeled as “natural” can come from animals that were raised with daily doses of antibiotics and other drugs, given artificial growth hormones, fed genetically engineered soy and corn feed and other artificial ingredients and continually confined indoors.

Consumer Reports then cites the results of a recent consumer survey which suggests that most consumers view the “natural” label as excluding the foregoing practices and ingredients.   Thus, “[t]oo many people believe they’re avoiding toxic pesticides, artificial growth hormones, and GMOs when they buy food labeled ‘natural.’”

The petition therefore urges (a) the USDA to add the following section to 9 CFR 412.1: “The term “natural” may not be used on labeling for meat products and poultry products” and (b) the FDA to add the following section under 21 CFR 101 General Provision for Food Labeling: “The term ‘natural,’ or any derivation of the term, such as ‘naturally grown,’ ‘naturally sourced,’ or ‘from nature,’ is vague and misleading and should not be used.”

Consumer Reports certainly has a point.  There is no question that the term “natural” is vague and subject to different interpretations.  And there are certainly food products with questionable “natural” claims when compared to the expectations of a reasonable consumer.   Moreover, as I wrote in January, the FDA has no interest in crafting a formal definition of the term “natural.”  It recognizes that such a task means traveling down the proverbial rabbit hole in a potentially vain effort to  issue a regulation or formal guidance on this amorphous term.  It noted that engaging in this process requires it to consider, among other things, “relevant science; consumer preferences, perceptions, and beliefs; the vast array of modern food production technologies in addition to genetic engineering (e.g., use of different types of fertilizer, growth promotion drugs, animal husbandry methods); the myriad food processing methods (e.g., nanotechnology, thermal technologies, pasteurization, irradiation); and any strictures flowing from the First Amendment.”  (Emphasis added)

The Consumer Reports’ petition seeks to avoid these complications by simply banning all uses of “natural” labeling.  But this approach tosses the baby out with the bath water.  Specifically, banning all uses of “natural” precludes uses of “natural” in cases where it is plainly not false or misleading.  In this regard, the petition also appears to bar all uses of the term, no matter how narrowly drawn.  These points raise First Amendment concerns and concerns about the regulatory authority for the proposed regulations.  Notably, if the petition sought to prohibit natural labeling only as to certain types of food products, ingredients, technologies and/or processes, then it would be creating a de facto definition of natural that brings with it all the complications the FDA wants to avoid.

In light of the foregoing, I doubt the FDA or USDA will view this petition any differently than petitions asking for a formal definition of “natural.”  As I told NPR,  “[t]his is not a health or safety issue for them” and not high on the agency’s list of priorities.”

Supreme Court Rules 8-0 In Favor of POM Wonderful

The Supreme Court has ruled 8-0 in favor of POM Wonderful in its lawsuit against Coca-Cola with respect to its Minute Maid “Pomegranate Blueberry” juice blend.   I am fortunate to have been quoted in numerous articles discussing today’s ruling.

USA Today – “Justices: Coke’s Pomegranate Juice Not the Real Thing.”

CBS News Moneywatch – “In Juicy Battle with Coke, Supreme Court Sides with POM.”

Washington Post – “Supreme Court says Coca-Cola can be sued over Juice Drink Label.”

Food Navigator – “POM Wonderful scores ‘resounding victory’ at Supreme Court, But What Does it Mean for Your Label?”

National Law Journal – “Supreme Court Closes Safe Harbor in False Advertising Wars.”

 

Hershey’s Not Amused By Pot-Infused “REEFER’S” Peanut Butter Cups

Hershey’s also just filed a very similar lawsuit against pot-infused candy makers in Colorado.  See here.  For obvious reasons, Hershey’s is not amused by sales of pot-infused candy products that plainly trade on its well-known trademarks and packaging.  While mimicking popular candy brands might have been popular for illegal marijuana products, that practice will likely fade very quickly for regulated dispensaries.