Stay ADvised: What's New This Week, March 28
In This Issue:
- Federal Preemption "Be-Hoofs" 10th Circuit to Dismiss Plaintiffs' Deceptive "Product of USA" Beef Claims
- "Can a Burrito Change the World?" Not Before You Modify Some Claims, Finds NAD
- Vital Farms Fails to Egg-xact Dismissal of PETA Claims It's Deceiving Consumers About "Humane" Eggs
- FTC Bans Two Supplement Cos. From Biz for Life
Federal Preemption "Be-Hoofs" 10th Circuit to Dismiss Plaintiffs' Deceptive "Product of USA" Beef Claims
The 10th Circuit Court of Appeals has put out to pasture class action allegations that Tyson Foods, Cargill Meat Solutions, and others deceptively branded their beef as "Product of the USA" despite allegations it was made from the meat of imported cows.
On the table were two separate but related lawsuits, on appeal by plaintiffs. At issue was whether plaintiffs' attempts to force defendants to change their labels are preempted by federal law.
In one of the suits, plaintiffs alleged that Tyson deceived consumers into paying higher prices for beef falsely labeled as being from the United States. In the other suit, plaintiff and U.S. cattle rancher Michael Lucero alleged that he and other ranchers were paid less for their domestic cattle as a result of these same allegedly deceptive practices.
Both suits alleged that the "Product of the USA" labels on Tyson's beef products are deceptive because the cattle are raised abroad, then imported and slaughtered in the United States. In addition, they alleged that Tyson violated the New Mexico Unfair Practices Act (UPA) and also advanced common law claims for unjust enrichment. The 10th Circuit concluded plaintiffs' claims were expressly preempted by federal law.
The Panel explained that the federal agency "tasked with ensuring that meat labels are not misleading or deceptive" had already approved the labels. "In seeking to establish that defendants' federally approved labels are nevertheless misleading and deceptive under state law, plaintiffs aim to impose labeling requirements that are different than or in addition to federal requirements," wrote the court. Fatal to the suits is an express preemption provision in the Federal Meat Inspection Act (FMIA) that prohibits states from imposing labeling requirements on top of federal law.
The panel also determined that contrary to plaintiffs' argument that there exists a presumption against preemption, the FMIA preemption provision is broad, prevents states from imposing even nonconflicting requirements, and "plainly" preempts plaintiffs' claims. Allowing plaintiffs to proceed would impose a different requirement on companies than what the federal agency had already required, added the panel.
Neither did the court buy plaintiffs' arguments that FMIA allows states to exercise concurrent jurisdiction to prevent misbranding. This concurrent jurisdiction, wrote the court, still had to be "consistent with the requirements" of the law, and plaintiffs were asking the court to take a step that would be clearly inconsistent with the existing federal approval of the labels at issue.
Finally, the panel affirmed the district court's finding that plaintiffs failed to state a claim for false advertising. Third parties—and not Tyson—had produced the allegedly false ads, it said. Additionally, plaintiffs "barely" referenced the false advertising in their complaint and in their appeal did not challenge the district court's conclusion that they failed to allege that the defendants engaged in false advertising.
Preemption can be tricky, but this case proved easy for the 10th Circuit in the absence of clear false advertising allegations, which can be a workaround to otherwise classic principles of federalism and preemption.
"Can a Burrito Change the World?" Not Before You Modify Some Claims, Finds NAD
Environmental and sustainability claims once again took center stage in a recent National Advertising Division (NAD) matter in which the self-regulating agency reviewed claims made by Chipotle Mexican Grill as part of NAD's independent and routine monitoring of national advertising.
NAD looked at online and television advertising, including sustainability claims prefaced with a child asking the question, "Can a Burrito Change the World?"—an interesting query for burrito-lovers but one that NAD found nevertheless requires substantiation. The Chipotle television commercial claimed that a Chipotle burrito "could make our farmers . . . more organic . . . less carbon emitting."
The child in the spot says of the burrito, "It could change how we plant things, water things, grow things, pick things, move things, and transportation [sic] things. It could make our farmers happier, more organic, more real, more soil helping, less carbon emitting, and world changing."
NAD found that although aspirational in tone—the company wasn't conveying the message that Chipotle is currently more organic but rather communicated a "forward-looking aspirational message"—the message was supported because the company was "in fact engaged in genuine efforts to" achieve that goal. NAD noted, as an example, that Chipotle purchased large amounts of organic ingredients, ostensibly boosting the market for such products. Chipotle also submitted evidence showing it reduced its carbon emissions.
On the question of whether Chipotle could claim the company practices were currently sustainable, NAD came to a somewhat different conclusion. Specifically, NAD examined Chipotle's "Real Foodprint" sustainability program, which provides customers with detailed information about things like the number of gallons of water and amount of carbon emissions saved and square footage of organic land supported per individual purchase. Real Foodprint shows consumers "… how the Chipotle difference is real."
Although the program (implemented via a third-party data platform called HowGood), was broad and well-documented, NAD was concerned that the claims comparing Chipotle ingredients to conventional ingredients reasonably conveyed the message that the Real Foodprint's metrics are specific to each customer's order rather than based on overall averages. NAD found that reasonable consumers might take away the message that they have personally reduced their environmental impact, an unsupported message. Because the evidence was too general to warrant Chipotle's specific claims, NAD recommended the company modify its Real Foodprint claims to clarify that they were based on average sustainability assessments.
Finally, turning to specific sustainability claims, NAD concluded that Chipotle substantiated the claims that it was "saving water through greywater reduction, improving soil health, and committed to diverting 50% of waste from landfills in 2020." However, it asked the advertiser to modify the claim that it was reducing carbon emissions "from farm to soil." NAD found that Chipotle hadn't substantiated this broad message and instead needed to clarify "the parts of its supply chain that have reduced carbon emissions."
Proving that what is old is new again, 10 years ago NAD reviewed Chipotle advertising and cautioned that "there is a distinction between, on one hand, an advertisement that claims the advertiser possesses green attributes or sustainable practices, and, on the other hand, an advertisement that communicates a goal of sustainability or a more aspirational message." NAD noted, however, that even if the advertisement's message of sustainability is merely aspirational, the advertising claim still requires substantiation. This remains true today.
Vital Farms Fails to Egg-xact Dismissal of PETA Claims It's Deceiving Consumers About "Humane" Eggs
A new putative class action backed by People for the Ethical Treatment of Animals (PETA), alleging that egg producer Vital Farms deceives consumers by representing it treats its hens in an ethical and humane way, will proceed following the Texas District Court's refusal to dismiss the case.
According to the complaint, although Vital Farms markets its treatment of animals as "ethical, humane and transparent" to justify what the group calls "very expensive eggs," "consumers have been tricked into paying an unjustifiably high premium" because, it claims, the hens are not treated humanely. Plaintiffs allege, for example, that Vital Farms' operations involve purchasing female chicks from hatcheries that kill male chicks and selling hens to be killed when they can no longer lay eggs daily. The complaint also alleges that Vital Farms' claims that its hens are "pasture raised" are deceptive since the hens live packed together indoors and many never access outdoor pastures.
In its motion to dismiss, Vital Farms argued that use of the term "pasture raised" conforms with Human Farm Animal Care (HFAC) standards. The court noted, however, that compliance with HFAC standards doesn't obviate plaintiffs' claim that the term "pasture raised" may be misleading to reasonable consumers. "Defendants do not cite any case law that a term cannot be misleading to consumers simply because the HFAC has defined it differently from its plain meaning," added the court.
The court also rebuffed the company's argument that its use of the word "ethical" was not actionable because it was a subjective statement of opinion. Cases that Vital Farms cited in support either involved a securities cause of action or their claims were found not deceptive because they were so "incredulous" that no reasonable consumer could rely on them—an argument Vital Farms wasn't making here.
This lawsuit is a part of a big trend in advertising litigation targeting companies that claim to use sustainable or humane practices—and charge a higher price for it—and instead conduct business as usual. As the complaint states: "Similar to companies who engage in greenwashing by making false claims about the environmental impact of their products, Vital is engaged in humane-washing by making false claims about the humane nature of its products."
FTC Bans Two Supplement Cos. From Biz for Life
The FTC has put the kibosh on advertising claims by two related Texas dietary supplement companies after finding ads regarding heart health miracle cures and neuropathy remedies misleading.
The process began in 2018 when the FTC entered a stipulated final order prohibiting Health Research Libraries, Whole Body Supplements, and their principal Kramer Duhon from making unsubstantiated health claims. When Whole Body allegedly violated that order, the FTC filed a contempt motion against them in 2019. The court denied that contempt order, forcing the agency to subsequently file this most recent administrative complaint and stipulated consent order.
In that FTC complaint, the agency targeted four products sold by defendants: Black Garlic Botanicals, BG18, The Ultimate Heart Formula (UHF), and Neupathic. In its complaint, the FTC alleged that the companies falsely and repeatedly claimed these vitamins could treat cardiovascular disease and diabetic neuropathy. The companies allegedly advertised the supplements mostly as mailers or on their website.
For Black Garlic Botanicals, mailers meant to look like periodicals marketed the supplement as a "breakthrough" for "cholesterol, blood sugar, blood pressure, the heart and the brain." Testimonials also claimed that the supplement significantly reduced cholesterol levels in a short period of time.
BG18, which contains identical ingredients to Black Garlic Botanicals, was also marketed for heart health as the "Japanese secret to significantly reducing heart attack risk" that's "all natural, safe," "effective," and even "a true miracle for cardiovascular health," said the FTC.
Defendants marketed The Ultimate Heart Formula in splashy sensationalist ads touting that "when it comes to a sudden heart attack, what you don't know CAN hurt you." The supplement was marketed as "our most effective, natural, heart-helping treatment."
The company marketed Neupathic as the "perfect nerve pain easing pill … to restore circulation and soothe nerve pain associated with diabetes," said the FTC. Defendants claimed it could ease symptoms such as "burning, itching, swelling" and "cramps."
Now the proposed consent order effectively bans the companies and their principal from the nutritional supplement businesses. It forbids them from advertising or selling any dietary supplement or assisting anyone to do so. The companies must also notify consumers who purchased the supplements about the consent order.
The FTC frequently pursues bogus health supplement claims, but it's rare that a company and its principals are banned from the industry—a response no doubt to both the companies' long-standing wrongdoing and to the contempt order loss