Hain’s Legal Battles Offer Class Action Defense Strategies
In prior posts, we have addressed the issues and challenges facing a number of companies in the “natural” and “organic” industry. We have discussed cases that have signaled the potentially increased challenge of relying on preemption and primary jurisdiction arguments against “all natural” advertising, as well as highlighted a few decisions that provided a glimmer of hope to companies facing increased consumer product class actions.
This post discusses a number of legal battles Hain Celestial Group, Inc. has faced over its labeling and advertising, and highlights its successes in defeating a majority of those challenges. Since 2008, Hain has faced at least seven putative class actions as well as one action by a competitor. The suits have challenged the company for its use of “organic,” “natural,” “pure & natural,” “100% vegetarian,” and “raw.” In each case, the various plaintiffs have alleged that Hain’s labeling and advertising is misleading to consumers, misrepresents the quality or characteristics of the products, and amounts to false advertising. As of earlier this month, Hain has successfully defended four of those suits. Hain’s wins provides some hope for companies facing similar challenges.
In 2012, two U.S. District Court Judges in the Northern District of California dismissed two separate cases based on the primary jurisdiction doctrine (one involving “organic” claims and the other “natural” claims). In All One God Faith, Inc. v. Hain Celestial Group, Inc., et al., after nearly four years of pre-trial motion practice, U.S. District Court Judge Susan Illston deferred to the USDA’s authority to determine whether Hain and others misled consumers by labeling “organic” cosmetics that allegedly contain petrochemicals and synthetic materials. A few months later, in Astiana v. Hain Celestial, U.S. District Court Judge Phyllis Hamilton opted to defer to the FDA’s expert judgments and authority. The court explained, “[i]n the absence of any FDA rules or regulations (or even informal policy statements) regarding the use of the word “natural” on cosmetics labels, the court declines to make any independent determination of whether defendants’ use of ‘natural’ was false or misleading. Doing so would ‘risk undercutting the FDA’s expert judgments and authority.’”
A year later, in Balser v. Hain Celestial Group, Inc., U.S. District Court Judge Manuel Real of the Central District Court of California, dismissed the plaintiff’s complaint on the grounds that “no reasonable consumer would be misled by the label ‘natural’” on cosmetic products. In reaching its conclusion, the court disagreed with the plaintiff’s contention that “100% vegetarian” means “only from vegetable matter [instead] the more common understanding is without animal products.” Judge Real acknowledged that Hain’s website provided an explanation about what natural ingredients are added, what ingredients are excluded, and a complete list of all ingredients. In its reasoning, the court stated, “Plaintiffs aver that ‘natural’ means: ‘existing in or produced by nature; not artificial.’ This definition is implausible as applied to the products at issue: shampoos and lotions do not exist in nature, there are no shampoo trees, cosmetics are manufactured. Thus Plaintiffs cannot plausibly allege they were deceived to believe shampoo was ‘existing in or produced by nature.’”
Earlier this month, Hain successfully defended a fourth suit. In the putative class action case,Alamilla, et al., v. Hain Celestial Group, Inc., the plaintiffs alleged that Hain’s product labels and website regarding Hain’s juice products were misleading to consumers. The plaintiffs took issue with Hain’s representations that the juices are “100% Raw,” “Raw and Organic,” and/or “Unpasteurized”; that “cooking juice” kills vitamins and enzymes; that “juice should never be cooked”; and that Hain’s juices are not cooked because they are treated with pressure, rather than heat.
In this case, the plaintiffs pled themselves out of their claims. First, in opposition to Hain’s motion to dismiss, the plaintiffs conceded that the challenged representations were not literally false. Second, in the complaint, the plaintiffs incorporated by reference two articles that contradicted their claims. Specifically, the articles stated that pressurization has “little or no effect on nutritional and sensory quality aspects of food.” Thus, the court found that the articles “contradict the allegation upon which their entire complaint hinges—namely, that pressure treatment deprives juice of nutritional value to a similar degree as pasteurization.” Despite the articles repeatedly making the point that pressurization has less impact on nutritional value than pasteurization, at the hearing on the motion to dismiss, the plaintiffs argued that the articles do not support that conclusion. The court disagreed. In its closing comments, the court quoted the 9th Circuit case Sprewell v. Golden State Warriors, “A plaintiff can plead himself out of court by alleging facts which show that he has no claim, even though he was not required to allege those facts.”
Despite these wins, Hain has not been able to shake a handful of challenges. In a putative class action suit brought by Rosminah Brown and Eric Lohela, the plaintiffs claim Hain’s Avalon Organic and Jason brands are marketed as organic even though they are allegedly not made predominately with organic ingredients and in violation of the California Organic Products Act of 2003 (COPA). In its most recent decision, the court denied Hain’s argument that the California Department of Public Health’s inquiry into the validity of Hain’s organic labeling was an “enforcement proceeding” that “extinguished” Plaintiffs’ claim for injunctive relief under COPA. In addition, in the case Tatiana Von Slomski v. Hain Celestial Group, Inc., the court denied Hain’s argument that the “100% natural” label on its tea products was mere “puffery.”
Earlier this month, a new putative class action was initiated against Hain in New York, Segedie, et al., v. The Hain Celestial Group, Inc.
Hain’s wins provide helpful insights for companies facing similar challenges. First, get to federal court if possible. Second, challenges at the pleading stage may help to narrow, if not eliminate the action entirely. Third, not every case, court, or judge is the same, so even if the allegations seem very similar, the results may vary across diverse jurisdictions. Finally, and most significantly, even though there may not be a single magic bullet to end lawsuits challenging “natural” or “organic” labeling claims, there are a variety of defenses that may be successful. It is important to identify strategies and potential defenses early rather than simply acceding to an extortionate settlement demand at the outset.