KFC franchisees have reportedly made their closing arguments before a Delaware Chancery Court in a dispute over the company’s advertising policies. They contend that 1997 amendments to the company’s corporate documents gave them the authority to propose and approve different advertising recommendations. The lawsuit was apparently filed after KFC Corp. launched an advertising campaign for grilled chicken menu offerings, which the franchisees opposed for their potential to dilute the company’s fried chicken brand. According to a news source, the franchisees argued that while they can veto funding for advertising by majority vote, this power is illusory because KFC could institute delays, thus causing a blackout that would inflict significant damage on franchisees. The company apparently countered that the franchisees do have the right to make recommendations or modifications to the company’s advertising policy and have exercised that right on several occasions. Still, the company reportedly indicated that the franchisees cannot have…
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The San Francisco Board of Supervisors has given preliminary approval to an ordinance (No. 101096) that would prohibit restaurants from offering toy giveaways in children’s meals deemed too high in calories, salt or fat. Approved by an 8-to-3 vote on November 2, 2010, the legislation reportedly has enough votes to override Mayor Gavin Newsom’s expected veto when the bill comes before the board for a final vote. If approved, the law would take effect in December 2011. Under the ordinance, restaurants would be prohibited from offering “incentive items” such as toys, trading cards or admission tickets in meals containing more than 600 calories and 640 milligrams of sodium, and if fat makes up more than 35 percent of the calories, except for fats contained in nuts, seeds, eggs, or low-fat cheese. It would also require meals to include a certain amount of fruits and vegetables. District 8 Supervisor Bevan Dufty…
A judge from the U.S. Court of International Trade, sitting by designation in a New York federal district court, has determined that the obesity-related claims filed in 2002 against McDonald’s Corp. cannot be pursued as a class action. Pelman v. McDonald’s Corp., No. 02-7821 (S.D.N.Y., decided October 27, 2010). Essentially, the court found that individual causation issues predominated over common ones and that, as to any common issues, the plaintiffs had failed to show that the putative class was sufficiently numerous for the court to certify an issues class. A spokesperson reportedly indicated that the company was pleased with the decision, stating, “As we have maintained throughout these proceedings, it is unfair to blame McDonald’s for this complex social problem.” Teenagers alleging obesity-related health problems claimed that they were misled by the fast food chain’s deceptive advertising into believing that the food could be consumed daily without any adverse health effects.…
A federal court in California has approved a motion for preliminary approval of a class action settlement in litigation involving allegedly fraudulent claims that Kellogg Co.’s Frosted Mini-Wheats® cereal “was clinically shown to improve children’s attentiveness by nearly 20%.” Dennis v. Kellogg Co., No. 09-1786 (S.D. Cal., decided October 14, 2010). The settlement class consists of everyone in the United States who bought the product between January 2008 and October 2009. The company has agreed to create a $2.75 million fund “to provide cash payments to class members who submit valid Claim Forms. Class members may recover the full purchase price of the cereal they purchased ($5 per box), up to three boxes.” Any funds remaining will be “distributed to appropriate charities pursuant to the cy pres doctrine.” The company will also distribute specified food items valued at $5.5 million to charities feeding the indigent and will pay the costs of…
A putative class action has been filed in a federal court in Florida against POM Wonderful, LLC and its holding company, alleging that the defendants deceived consumers in the state by making health-benefit claims for POM’s pomegranate juices, pills, extracts, and concentrated liquids. Cortez v. POM Wonderful, LLC, No. 10-23680 (S.D. Fla., filed October 13, 2010). Alleging damages in excess of $5 million, the named plaintiff cites the Food and Drug Administration’s warning letter to the company and the Federal Trade Commission’s recently filed administrative complaint to support claims that the company’s representation about its products are “false and misleading.” Among the product claims alleged to be false are that it will prevent, mitigate and/or treat atherosclerosis, blood flow/pressure, prostate cancer, erectile dysfunction, cardiovascular disease, LDL cholesterol, and other age-related medical conditions. Seeking to certify a statewide class of consumers who bought the products from September 29, 2006, to the…
The Federal Trade Commission (FTC) has determined that its “Green Guides,” which “help marketers avoid making deceptive claims by outlining general principles that apply to all environmental marketing claims,” should be retained and updated. Initially developed in 1992 and last revised in 1998, the guides also provide information about how “reasonable consumers are likely to interpret particular claims, how marketers can substantiate them, and how they can qualify those claims to avoid consumer deception.” The proposed changes include new guidance on the “use of product certifications and seals of approval, ‘renewable energy’ claims, ‘renewable materials’ claims, and ‘carbon offset’ claims.” They do not address use of the terms “sustainable,” “natural” and “organic.” Public comments are requested by December 10, 2010. FTC Chair Jon Leibowitz was quoted as saying, “In recent years, businesses have increasingly used ‘green’ marketing to capture consumers’ attention and move Americans toward a more environmentally friendly future.…
A Kansas resident has filed a putative class action in state court against POM Wonderful, LLC, alleging that the company’s claims that its pomegranate products have special health benefits are false, deceptive and misleading. Haynes v. POM Wonderful, LLC, No. CV08720 (Kan. Dist. Ct., Johnson Cty., filed September 29, 2010). Seeking to certify a statewide class of consumers, the plaintiff refers to actions that advertising watchdogs and government agencies have taken against the company, including the recent Federal Trade Commission administrative complaint, after purportedly determining that the company does not have a sufficient scientific basis to make health-related representations about its products. The plaintiff alleges violations of the Kansas Consumer Protection Act and unjust enrichment and seeks damages in excess of $25,000, attorney’s fees and costs.
POM Wonderful LLC has filed a complaint for declaratory relief in a D.C. federal court against the Federal Trade Commission (FTC), alleging that it (i) exceeded its authority in requiring Food and Drug Administration (FDA) preapproval of health-related claims on food products, that is, those claims stating that a product treats, mitigates or prevents disease, and substantiation of non-disease-related claims with two “well-controlled” clinical studies; (ii) violated advertisers’ First and Fifth Amendment rights by requiring compliance with these new standards; and (iii) failed to comply with notice and comment rulemaking procedures in establishing the standards. POM Wonderful LLC v. FTC, No. 10-1539 (D.D.C., filed September 13, 2010). According to the complaint, FTC has advised POM Wonderful that it must comply with standards recently announced in consent orders against other companies and now apparently applicable to the food and dietary supplement industry as a whole. Additional information about one of those orders…
The American Bar Association Tort Trial & Insurance Practice Section’s Animal Law Committee will convene a teleconference on September 28, 2010, to discuss farmed animal welfare and related labeling issues. Temple Grandin, a Colorado State University professor well-known for her work in animal science, will be among the panel of experts to discuss (i) “commercial speech and the role of liability for false advertising under federal and state law in the labeling of food products”; (ii) “the movement to promote more detailed labeling regarding animal welfare and to create verifiable compliance”; (iii) “what, if any, legal meanings are ascribed to terms such as ‘humane,’ ‘cage-free,’ ‘free-range,’ ‘natural’ and ‘organic’ and how are they used in practice vis a vis animal welfare”; and (iv) “the rapidly shifting world of scientific awareness and consumer perceptions regarding what constitutes satisfactory animal welfare, and its impact on producers’ ability to provide accurate labeling.”
For the second time in less than a month, Heartland Sweeteners has apparently been told by an advertising industry self-regulatory body that the company should not promote its Nevella with Probiotics® artificial sweetener with immune system and digestive health claims unless it can support them with “competent and reliable evidence.” Information about action taken against the company in August 2010 by the appellate arm of the National Advertising Division (NAD) of the Council of Better Business Bureaus appears in Issue 362 of this Update. NAD apparently took its latest action in response to a challenge filed by Heartland rival McNeil Nutritionals, LLC, which makes Splenda®. Among Heartland’s claims were that its product “Provides digestive and immune system health benefits in every packet,” “Promotes digestive health” and “Supports a healthy immune system.” According to NAD, the company based its claims on studies about the benefits of individual ingredients. “[W]hen the substantiation…
