mckenziy_printGuest Commentary

By Yvonne M. McKenzie, a Partner with Pepper Hamilton LLP in the firm’s Philadelphia, PA office, and Colleen Kelly, an Associate with the firm.

In February, plaintiffs filed a class-action lawsuit in California against candy maker Jelly Belly on behalf of consumers who purchased jelly beans marketed as “Sport Beans.” They claimed that Jelly Belly used the phrase “evaporated cane juice” (ECJ) in its ingredient labeling to mislead consumers about the amount of sugar in Sport Beans.

Jelly Belly markets the product to athletes seeking a jolt of “quick energy,” which is usually accomplished through ingesting sugar and carbohydrates. Far from masking its ingredients, the product labeling clearly states that Sport Beans contain 19 grams of sugar per serving. Despite this, the plaintiffs claimed that the term ECJ misled them into thinking that the product contained juice, not sugar. Never mind that juice itself typically contains sugar.

The case was recently dismissed, but not because it was implausible that a reasonable consumer would be misled by the term ECJ. Rather, the plaintiffs failed to plead facts specific to their purchase of the product and their reliance on Jelly Belly’s advertising. The court allowed the plaintiffs to amend the complaint to add more of these details.

The Jelly Belly case is just one of many class-action lawsuits filed in the last few years by plaintiffs who claim that a reasonable consumer would be deceived by the use of ECJ on product labeling. Some argue — as in the complaint filed against Jelly Belly — that they did not realize that ECJ was sugar. Others concede that they did know, but thought ECJ was a “healthier” or “naturally occurring” sugar. Whatever the theory, it is hard to believe these actions are filed. And it is even harder to believe that, in many cases, courts have been reluctant to dismiss them as implausible and frivolous early on.

A familiar factor drives much of this litigation: FDA action. In 2009, FDA issued draft guidance on the use of the term ECJ in food labels. Draft Guidance for Industry: Ingredients Declared as Evaporated Cane Juice; Availability, 74 Fed. Reg. 51,610 (Oct. 7, 2009). FDA found the term misleading because the substance known as “cane juice” does not meet the regulatory definition of “juice.” FDA recommended that manufacturers instead use the phrase “dried cane syrup” to describe the sweetener, as cane syrup has a standard of identity defined by regulation.

jelly bellyThis set off a firestorm of litigation, mostly originating in the California courts and filed under plaintiff-friendly statutes like the California Unfair Competition Law and False Advertising Law. Some cases were rightly dismissed on a motion to dismiss, with courts finding implausible that consumers would not have recognized ECJ as a sweetener. See, e.g., Pratt v. Whole Food Mkt. Cal. Inc¸ No. 5:12-cv-05652-EJD, 2015 U.S. Dist. LEXIS 134968, at *17-18 (N.D. Cal. Sept. 30, 2015). Others were settled, usually after a motion to dismiss was denied. See, e.g., Swearingen v. Santa Cruz Natural, Inc., 2016 U.S. Dist. LEXIS 109432, *2 (N.D. Cal. Aug. 17, 2016). But many of these cases were stayed or dismissed without prejudice under the primary jurisdiction doctrine after FDA reopened the comment period on the use of the term ECJ in March 2014. See, e.g., Kane v. Chobani, Inc., No. 5:12-cv-02425-LHK (N.D. Cal. Jul. 29, 2016).

In May 2016, FDA issued its final, nonbinding guidance. U.S. Food & Drug Admin., Ingredients Declared as Evaporated Cane Juice: Guidance for Industry (2016) (Final Guidance). While FDA still advised that it found the term ECJ “misleading,” it also acknowledged that the term “dried cane syrup” did not accurately describe the process used to prepare the sweetener. Thus, FDA recommended that manufacturers characterize ECJ as “sugar,” noting that the use of the term “juice” in ECJ was confusing because the term implies that the liquid comes from fruits or vegetables.

As predicted, the final guidance reinvigorated ECJ litigation. Cases that were stayed were activated. Several were ultimately dismissed. For example, in Swearingen v. Healthy Beverage LLC, the court dismissed the plaintiffs’ claims because the plaintiffs had seen the product’s website stating that “cane juice is natural sugar.” Thus they could not have relied on any misrepresentation regarding ECJ, because they knew that ECJ was in fact sugar. No. 13-cv-04385-EMC, 2017 U.S. Dist. LEXIS 66938, at *11-12 (N.D. Cal. May 2, 2017).

But courts have allowed other cases to advance to discovery, despite reservations that the plaintiffs would ever be able to prove that a reasonable consumer would be misled. For example, in Santa Cruz, the same plaintiffs from the Healthy Beverage case claimed that they would not have purchased the products at issue if they knew that ECJ was actually sugar. Swearingen v. Santa Cruz Natural, Inc., No. 13-cv-04291-SI, 2016 U.S. Dist. LEXIS 109432, at *9-10 (N.D. Cal. Aug. 17, 2016). The court found the plaintiffs had adequately alleged reliance and economic loss. Id. at *8-10. At the same time, however, the court expressed “some reservations as to whether a reasonable consumer would be misled” at least as to certain products with high amounts of sugar listed on the label. Id. at *22. The court logically reasoned that “[i]t is unclear that a reasonable consumer would believe that 35 grams of sugar naturally occurs, as plaintiffs allege, in filtered water, lemon juice, or other lemon flavorings.” Id. at *22-23.

Plaintiffs’ attorneys have filed new cases as well — many in states outside of California. In many of these cases, the plaintiffs have done their best to avoid removal under the Class Action Fairness Act, fashioning their complaints to limit the number of potential class members and/or the amount in controversy.

In many of these cases, FDA’s Final Guidance has been used by plaintiffs and courts alike as evidence that a reasonable consumer could be misled by the use of the term ECJ. Swearingen v. Late July Snacks LLC, 2017 U.S. Dist. LEXIS 69280 at *13 (N.D. Cal. May 5, 2017). Indeed, the Jelly Belly court cited the Final Guidance as evidence that the plaintiffs adequately established a reasonable consumer could be misled. But reliance on the Final Guidance in these cases is misplaced and inappropriate. The FDA Final Guidance is just that — guidance. It is not legally binding. Moreover, FDA’s view that ECJ is misleading is premised largely on whether ECJ met the regulatory definition of “juice,” not on how a consumer would view the term, which likely has little connection to how FDA defines “juice.”

Whether a reasonable consumer would be misled by the term ECJ should not be a hard question in these cases. These cases are simply contrived, attorney-driven litigation at its worst. Unless and until courts start dismissing these cases at the outset, the ECJ litigation will grow unchecked — ultimately leading to costly settlements for food and beverage manufacturers, which likely do not have the appetite to spend money on years of discovery and experts to fend off these cases. This litigation fails to help consumers and only benefits plaintiffs’ attorneys who reap the lion’s share of judgments while clogging an already overburdened judicial system.