What's in the Package: Food, Beverage, and Dietary Supplement Law and Litigation—part Ii

Publication year2014
CitationVol. 43 No. 8 Pg. 71
43 Colo.Law. 71
What's in the Package: Food, Beverage, and Dietary Supplement Law and Litigation—Part II
Vol. 43, No. 8 [Page 71]
The Colorado Lawyer
August, 2014

By Jordan Lipp, Ed Hafer

Tort and Insurance Law

What's in the Package: Food, Beverage, and Dietary Supplement Law and Litigation—Part II

Tort and Insurance Law articles provide information concerning current tort law issues and insurance issues addressed by practitioners representing either plaintiffs or defendants in tort cases. They also address issues of insurance coverage, regulation, and bad faith.

Coordinating Editor

William P. Godsman of the Law Office of William Godsman, Denver—(303) 455-6900, willgodsman@gmail. com

About the Authors

Jordan Lipp is a partner with Davis Graham & Stubbs, LLP—(303) 892-7471, jordan.lipp@dgslaw.com. Ed Hafer is an associate with Davis Graham & Stubbs, LLP-(303) 892-7254, ed.hafer@dgslaw.com.

This two-part article discusses the regulatory framework applicable to the food, beverage, and dietary supplement industries. It also addresses Colorado law on personal injury claims resulting from consumption of food products and on false advertising/labeling claims regarding food products.

The colorful cacophony of labels that consumers navigate when they browse supermarket shelves can confuse even U.S. Supreme Court Justices—Justice Kennedy confessed during oral argument that he thought "pomegranate-flavored juice" meant "pomegranate juice."[1] Justice Kennedy went so far as to use the word "cheat" twice when referring to an allegedly misleading food label.[2] This potential for confusion and possible deception lies behind what one federal judge describes as a "flood" of mislabeling cases by consumers challenging the marketing of "everything from ice tea to nutrition bars" that has California as its epicenter, but that has started to spread to Colorado.3 Here, we consider the legal framework for such claims when brought by consumers.[4]

Part I of this article, published in the July 2014 issue,[5] provided an overview of the regulatory framework applicable to foods, beverages, and dietary supplements, and examined Colorado law as it relates to litigation alleging a physical injury as a result of the consumption of foods, beverages, or dietary supplements. This Part II addresses pecuniary loss claims by consumers against food, beverage, and dietary supplement manufacturers and retailers.

Pecuniary Loss Claims

In recent years, the number of cases asserting false advertising and/or labeling with regard to foods, beverages, and dietary supplements that result in pecuniary loss—as opposed to personal injury or death—has exploded nationwide. These pecuniary loss claims typically involve allegations that the labeling and/or advertising of the various items were false, and this in turn misled consumers into purchasing the items.

This part of the article first addresses the types of claims under Colorado law asserted in these cases. The second section discusses the most complex issue in these cases—federal preemption.[6] The third part reviews the typical defenses (other than preemption) asserted in these cases. The final section addresses class action issues associated with these claims.

Types of Claims

In the context of false labeling and/or advertising cases, the most typical claim is a violation of the Colorado Consumer Protection Act (CCPA). There are two other common types of claims—breach of warranty and fraud.[7] All three causes of action are addressed below after a review of other potential claims.

On occasion, plaintiffs also assert other causes of action.[8] However, claims of strict liability for misrepresentation, addressed in Part I, are likely inapplicable where there is no physical injury.[9] Similarly, negligent misrepresentation claims are likely inapplicable to these types of cases.[10] Thus, the primary claims, depending on the facts, are CCPA, breach of warranty, and fraud.

Colorado Consumer Protection Act.

The CCPA serves to deter and punish deceptive trade practices and provides for a private right of action.[11] The CCPA permits the plaintiff to recover attorney fees and treble damages (if, in the case of the latter, it is shown by clear and convincing evidence that the defendant engaged in bad faith conduct).[12] Such damages are not permitted in the case of a class action under the CCPA.[13] Indeed, it is likely that even compensatory damages under the CCPA are not permitted in the context of a class action.[14]

The elements of a CCPA claim are: (1) the defendant engaged in a deceptive trade practice; (2) the deceptive trade practice occurred in the course of the defendant's business; (3) the deceptive trade practice significantly impacted the public as actual or potential consumers of the defendant's food; (4) the plaintiff was an actual or potential consumer of the defendant's food; and (5) the deceptive trade practice caused actual damages or losses to the plaintiff.[15] It should be noted that the plaintiff must show that the defendant "knowingly" engaged in a deceptive trade practice. The CCPA "provides an absolute defense" for a defendant who made a misrepresentation caused by negligence or an honest mistake.[16]

The definition of deceptive trade practices expressly includes certain situations involving food. The CCPA provides that a defendant "engages in a deceptive trade practice" when the defendant:

(e) Knowingly makes a false representation as to the characteristics, ingredients, uses, benefits, alterations, or quantities of goods, food, services, or property or a false representation as to the sponsorship, approval, status, affiliation, or connection of a person therewith;

(g) Represents that goods, food, services, or property are of a particular standard, quality, or grade, or that goods are of a particular style or model, if he knows or should know that they are of another; [or]

(z) Refuses or fails to obtain all governmental licenses or permits required to perform the services or to sell the goods, food, services, or property as agreed to or contracted for with a consume r[.][17]

Food, under the CCPA, is defined a little differently than it is under the Colorado Food and Drug Act. The CCPA defines food as: "any raw, cooked, or processed edible substance, beverage, or ingredient used or intended for use or for sale in whole or part for human consumption."[18] The foregoing list of items is not the only deceptive trade practices that apply to litigation in the food context. For example, in Martinez v. Nash Finch Company, the plaintiffs asserted other deceptive trade practices —that is, those enumerated in CRS § 6-l-105(l)(i), (I), and (u)—regarding allegations that the defendant grocery store engaged in false advertising of the pricing of its foods.[19]

Breach of warranty.

Breach of warranty claims in the false advertising/labeling context follow the same general law as set forth in the physical injury section in Part I of this article.

Fraudulent misrepresentation.

To state a claim for a fraudulent misrepresentation, the plaintiff must show: (1) the defendant made a false representation of fact or an omission of material fact (for example, regarding the nature or contents of the food); (2) the representation or omission was made to induce the plaintiff to act or with the intention that it be acted on (for example, that the consumer purchase the food); (3) the plaintiff justifiably relied on the representation or omission ( for e xample, purchasing the food based on the statements regarding the nature or contents of the food);[20] and (4) the reliance resulted in damages (for example, the difference between the value of the food if the label had been accurate and the food actually sold).[21]

Federal Preemption

Similar to other industries that are heavily regulated by federal law, issues of preemption often arise in the food, beverage, and dietary supplement context. Under the Supremacy Clause of the U.S. Constitution, any state law that conflicts with the exercise of federal power is preempted.[22] State tort law claims against several other categories of products regulated by the FDA are almost entirely preempted.[23] Although there is a current dearth of Colorado-specific law on the subject of preemption in the context of food, beverage, and dietary supplements, courts throughout the country are wrestling with the various issues raised by preemption in this context. Numerous courts have found food labeling lawsuits preempted,[24] while numerous other courts have reached the opposite result.[25]

There are three types of federal preemption. First, Congress can pass a law that explicitly preempts state law (express preemption).[26] Second, preemption can exist where a state law actually conflicts with federal law (conflict preemption).[27] Third, federal preemption can be found where federal law entirely occupies a field to such an extent that it is reasonable to conclude that Congress left no room for state regulation (field preemption).[28] The burden of establishing preemption is on the party seeking to invalidate a state law.[29] Each of the three categories of preemption is addressed below.

Express preemption.

The U.S. Supreme Court has long recognized a strong state interest in regulating food products[30] and, as a result, courts apply a presumption against finding that federal law and regulations preempt state control over food, beverage, and dietary supplement labeling.[31] Also, a federal statute preempting state requirements to the extent those requirements are not identical to federal requirements does not necessarily prevent a state from providing a tort action remedy for a violation of a federal statute or regulation. The state's duties in such cases parallel, as opposed to add to, federal requirements.[32]

This presumption notwithstanding, federal statutes and...

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