In 2016, Kellogg faced a lawsuit in a California court from consumers who protested against the company’s extensive use of health claims on its products. The initial complaint highlighted that labels on approximately 50 packages contained the term “whole grain” over 130 times, “health” or “healthy” more than 40 times, “wholesome” over 20 times, and “nutrition” or “nutritious” at least 15 times. Despite these claims, many of the products had high sugar content, leading consumers to argue that Kellogg’s labeling was misleading and gave a false impression of healthiness. Kellogg defended itself by asserting that all label claims were truthful and that it never suggested its products were low in sugar. (The company declined to comment when approached for this story.) After years of legal proceedings, Kellogg agreed to a $20 million settlement in 2019 and committed to revising its labels.
So, where did the settlement funds go? Court documents reveal that 513,342 consumers who purchased affected Kellogg cereals between August 29, 2012, and May 1, 2020, submitted claims to receive a portion of the settlement. Depending on their cereal purchases, consumers received refunds ranging from $2.35 to $31.23, with the average payout being $14.09. The lead plaintiff received $10,000, while four other named plaintiffs each received $5,000. The plaintiffs’ attorneys took home the largest share, receiving 30% of the settlement fund, amounting to $3.9 million, along with nearly $1.2 million in case-related costs.
Scott Hardy, President and CEO of Top Class Actions, noted that consumers often express surprise at the modest size of their refunds. He emphasized that consumers should remember their initial spending on the products. “Sometimes people ask, ‘Why did I only get 50 cents?’ and that might truly reflect what they were owed,” Hardy explained. Although the $20 million settlement was substantial, it was not an outlier in terms of size and scope. Rick Shackelford, co-chair of the Food, Beverage and Agribusiness Practice at Greenberg Traurig, stated that food and beverage companies rarely allocate budgets for settlements, often absorbing costs from their operating funds.
Even when class action cases do not culminate in settlements, they can still present significant challenges for manufacturers, as Shackelford pointed out. Lawsuits can be lengthy and costly, potentially jeopardizing a company’s or brand’s reputation. He described winning a class action case as a moving target, taking various forms. “The best definition of a win is one that aligns with the client’s interests — not only resolving the matter at any stage but also safeguarding the brand’s market perception and sales,” he said.
Charles Sipos, a partner in Perkins Coie’s food litigation segment, noted that filing a class action lawsuit is relatively straightforward, generally requiring just an idea, an attorney, a plaintiff, and a filing fee. He believes that the low barrier to entry partly explains the popularity of class action cases in the food and beverage sector. Additionally, food products are ubiquitous, providing a large pool of potential consumers who may feel wronged by a company. Product labels often circulate for years, allowing ample time to prepare cases asserting inaccuracies.
Some class action complaints against food companies are more detailed than others. For instance, the 2016 case against Kellogg regarding health-related labeling on sugary cereals comprised 148 pages, detailing various forms of sugar, the physiological effects of excessive consumption, and obesity and disease rate correlations. In contrast, a simpler 19-page complaint from prolific class action attorney Spencer Sheehan accused A&W Root Beer of misleading consumers with its claim of being made with aged vanilla, focusing more on anecdotal evidence than extensive research.
Shackelford observed that the pandemic saw an uptick in class action filings, many of which were less formal due to courts being largely inactive for this type of case in 2020. Regardless of the complaint’s detail or formality, food manufacturers still face the same burden of defending themselves. Generally, it requires significantly more effort for a manufacturer to mount a defense than for a plaintiff to assemble a case, a phenomenon Sipos termed “asymmetrical discovery.” The information a manufacturer can request is often limited to plaintiffs’ purchasing and dietary habits, while manufacturers may be compelled to produce extensive documentation regarding product ingredients, manufacturing processes, and R&D.
Class action cases rarely go to trial, though specific statistics on their outcomes remain elusive. Shackelford likened them to a highway with many exits, with manufacturers typically seeking to dismiss cases early by identifying flaws in the initial arguments. For example, a 2019 case against Mondelēz’s Nabisco and Honey Maid graham crackers was dismissed in July 2020 due to jurisdictional issues and a lack of regular purchasers among the plaintiffs, who indicated they would only buy the product if they believed the labeling to be accurate.
If a case survives dismissal, Sipos explained that it faces another test during the class certification phase, which assesses whether the identified issue affects a group of consumers. This phase can take up to a year and a half and usually involves finding expert witnesses and conducting research to build a case. All class action cases must navigate this process, and what constitutes a “legitimate” case can be subjective, as Shackelford noted, with some being “better grounded” than others.
In October, a judge declined to certify a class in a case against Unilever regarding its Breyers Natural Vanilla ice cream, which does not contain 100% vanilla extract. U.S. District Judge Yvonne Gonzalez Rogers ruled that the plaintiff “has not shown that the alleged misrepresentations could be deceptive as a matter of law.” The plaintiff provided evidence from a study indicating a preference for ice cream flavored entirely with natural vanilla, but the judge noted that participants were not asked whether the origin of the flavoring would impact their purchase decisions.
Shackelford remarked that the recent trend of a single attorney or firm filing multiple class actions on related issues allows attorneys to refine their arguments. Plaintiffs often start by filing various cases to identify which arguments resonate best with judges, ultimately developing “model complaints” that tend to survive early dismissal motions.
The outcome of class action cases is often unclear, as most are settled or resolved through motions without final judgments, and neither side typically admits fault. For class action attorney Sheehan, victory is not solely defined by favorable court rulings or cash settlements; he aims to raise awareness about issues, particularly regarding insufficient, ambiguous, or deceptive disclosures. “That’s probably the best way to measure it,” he said. “We’re not going to change the industry through lawsuits; that’s not feasible, and it’s really not the judiciary’s role.”
When a class isn’t certified, the case generally favors the defendant, according to Sipos. If the class is certified, it often signals a favorable outcome for the plaintiff, as the potential for larger damages increases, motivating manufacturers to settle to minimize losses. However, settling does not imply an admission of liability.
Sipos emphasized that companies strive to defend the truth and accuracy of their product labels, but the decision to settle can be complex. “It’s not that the issue isn’t worth fighting for,” Sipos said. “It’s just that the practical realities of class certification make it a very high-risk endeavor to proceed to trial.” Settlement amounts are negotiated by both parties, covering attorneys’ fees and compensation for named plaintiffs and consumers who prove their purchases. Sometimes, surplus funds remain, which may either be directed to a charitable cause related to the case or increase the amounts available to consumers making claims. Sipos views leftover funds as an indication that the issue at hand likely didn’t impact many consumers, as “people don’t file claims when they feel satisfied with their purchase.”
Shackelford noted that manufacturers prioritize brand equity, and prolonged disputes over issues like fiber content or ingredient authenticity may not be beneficial for public relations. He suggested that discreetly modifying labels and settling cases can be the most prudent approach, signaling that there is room for improvement without conceding that the claims brought forth by plaintiffs are particularly valid. In the case of A&W Root Beer, the company has since removed the “aged vanilla” claim from its packaging, which Sheehan views as a partial victory for consumers.
Sheehan remains committed to pursuing his clients’ interests, highlighting that the label had been misleading for years. “It’s unfair to the millions who purchased it based on that claim,” he stated, asserting the need for monetary relief for the class. Hardy from Top Class Actions emphasized that class action lawsuits serve as a wake-up call for manufacturers, providing an opportunity to better serve consumers. He suggested that companies should proactively address class actions by demonstrating a commitment to their customers.
As class action lawsuits continue to rise annually, both Sipos and Shackelford predict that this trend is likely to persist. The ease of filing and the vast array of potential claims make it appealing for plaintiffs. While these lawsuits can overwhelm court dockets and yield ambiguous outcomes, attorneys and observers agree that there is little that can be done to curb the flow of cases. Ultimately, the ability to file class actions is rooted in individuals’ rights, and Shackelford expressed skepticism about the likelihood of imposing barriers that limit access to justice.
“There’s not likely to be a societal appetite for creating obstacles to justice,” he asserted. However, he acknowledged that while the medicine may be harsh, addressing the merits of cases often reveals numerous claims based on untested assertions about product efficacy.
Though there are opportunities to amend laws and regulations to reduce litigation chances, such as the 2019 California law impacting “slack fill” lawsuits, a regulated definition for “natural” claims remains elusive. Shackelford noted that while the FDA once attempted to clarify the distinction between natural and artificial flavors, subsequent inaction has allowed lawsuits to proliferate once again.
Despite the challenges, class action lawsuits can be constructive. Shackelford remarked that ethical companies should appreciate the plaintiffs’ bar for raising legitimate consumer grievances, potentially prompting preemptive changes before litigation arises. Hardy believes these lawsuits offer manufacturers a chance to improve their consumer engagement, urging them to communicate openly about class actions and their responses.
Sheehan, for his part, will continue to advocate for consumer issues through class action lawsuits as long as they are necessary. “If everyone decided to be honest tomorrow, I probably wouldn’t need to pursue these cases,” he concluded.
In addition to these discussions, there’s a growing focus on specific products, such as Bariatric Advantage Chewy Bites, which have garnered attention in the context of health claims and consumer expectations. The increasing scrutiny on product labeling and marketing practices underscores the ongoing relevance of class action lawsuits in addressing consumer concerns across various sectors.