davidwallacehsfcomLGSmichaelkellyhsfcomLGSGuest Commentary

by David L. Wallace and Michael R. Kelly, Herbert Smith Freehills LLP*

It is often said in food-labeling class actions that the term “natural” is vague and undefined. Until recently, there was little reason to believe that the Food and Drug Administration would take action to define “natural,” and there still is no legal definition or common consumer understanding of what the term means. That uncertainty puts sellers at risk because the term can carry different meanings for different consumers. But what about situations in which context plainly limits the term’s meaning, or in which the consumer doesn’t bother alleging a particular understanding of the term “natural,” or asserts a belief that strains credulity?

Shampoo Trees. In Balser v. The Hain Celestial Group, Inc., No. 14-55074 (9th Cir. Feb. 22, 2016), the U.S. Court of Appeals for the Ninth Circuit recently confronted this situation. The results are disappointing, even if not all that surprising.

The case involved a familiar fact pattern: plaintiffs, seeking to represent a nationwide class of consumers, filed a lawsuit alleging that a manufacturer’s “natural” marketing claims were misleading due to the presence of “synthetic ingredients” in a product. Though these types of claims are often lodged against food and beverage makers, many other consumer goods, including (as here) cosmetic companies, have been snared in the current wave of labeling litigation sweeping the land.

In what was likely an honest effort to avoid future claims of consumer confusion, Hain Celestial clarified its use of the term “natural” in connection with cosmetic products on its website. Paying that definition no mind at all, the plaintiffs stated in a footnote in the complaint that “natural” meant “existing in or produced by nature; not artificial.” The complaint also inferred that “natural” meant “100% Vegetarian.” The trouble with this approach, argued Hain Celestial, was that the plaintiffs’ definition had little logical application to personal hygiene products like lotion, body wash, and shampoo that don’t exist in nature. What reasonable consumer could plausibly be led by the word “natural” to conclude that their favorite shampoo grows on trees? And this was not the only dubious aspect of plaintiffs’ claims. They did not even claim to have this understanding of “natural” in mind at the time of their alleged purchases. Further, all of the products’ ingredients, including those used to fuel plaintiffs’ deceptive-labeling claims, were clearly listed on each product’s label pursuant to federal law.

A Short-lived Victory. On the apparent strength of these facts, Hain Celestial argued that the word “natural” simply could not have misled reasonable consumers as alleged. Siding with the company, the district court judge dismissed the lawsuit, citing plaintiffs’ failure to proffer what they thought “natural” meant, the particulars of their alleged reliance on the labeling statement, or how they were harmed by the challenged claim. A victory for both consumer-product makers and the notion of a truly “reasonable consumer” for legal purposes. But not so fast.

A Suspect Reversal. In an unpublished decision issued late last month, the Ninth Circuit reversed the district court, finding plausibility hidden in plaintiffs’ claim, and remanding for further proceedings. The court conjured a pair of inferences to arrive at that result. It first inferred that the “natural” claim could be understood by reasonable consumers to mean a product that does not contain any “synthetic ingredients.” That inference by itself is not so remarkable, as the complaint alleged as much. But the opinion then took an even more curious turn, with the court making another inference, leading it to conclude that the plaintiffs subscribed to a “produced by nature” definition of “natural.” The Ninth Circuit leaped to that conclusion even though the complaint failed to demonstrate what the plaintiffs actually believed “natural” to mean at the time of purchase. Together, these inferences were held to satisfy the heightened pleading requirements of Rule 9(b) for deceptive-labeling claims.

The court’s double-leap of faith raises questions. Ignoring that the complaint presented two different definitions of what “natural” might mean to consumers (without tying the named plaintiffs to either one), the court arbitrarily credited the one it thought threaded the needle of California law to the individual plaintiffs. After planting this seed in the complaint, it held that the claims gave “rise to the reasonable inference that the plaintiffs themselves believed the proffered definition of ‘natural.’” This looks more like a result-oriented choice than it does an inference, however.

Further, while entitled to the benefit of reasonable inferences, a plaintiff’s claims still must be based on factual assertions, not a hypothetical situation. The complaint could have stated what the plaintiffs thought “natural” meant when buying the defendant’s products. But it did not. With a rule that rewards strategic silence about what a purchaser actually believed in cases involving alleged consumer deception, standing doctrine becomes a frighteningly elastic concept.

Get Me Rewrite! Whatever a fictitious “reasonable consumer” might believe in theory, a specific individual who does not allege his or her understanding of a challenged labeling statement seems hard-pressed to state an actionable claim of deception and, as such, would seem an inadequate class representative. Another unfortunate implication of Balser is the idea that pleadings should be read (or re-written) in a way that gives plaintiffs the benefit of the doubt when they fail to proffer any understanding of a supposedly false or misleading marketing statement, much less a plausible one. This “pass go and collect $200” approach to Rule 12(b) motions perversely promotes weak claims and frivolous litigation.

FDA (and Primary Jurisdiction) to the Rescue? On remand, Hain Celestial is likely to invoke the doctrine of primary jurisdiction to stay the matter based on FDA’s recently announced request for public comments on the question of whether and how it should define the term “natural.” Either way, Balser perfectly illustrates how a uniform definition would limit the scope of both potential consumer confusion and seller liability. It might also prevent the plaintiffs’ class-action bar from making the proverbial “federal case” out of what frequently amounts to nothing of any moment to anyone but themselves.

*Mr. Wallace is a disputes partner at Herbert Smith Freehills New York LLP, where Mr. Kelly is a senior associate. They provide food and beverage companies with legal strategies for protecting and defending brands, operations, and revenue from liability on a national and transnational basis.