Campbell Labeling Fight Feared to Embolden Class-Action Attorneys

Case Shows Even Marketers in Compliance Should Tread Carefully

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When a federal judge recently allowed a case to proceed alleging false labeling by Campbell Soup Co., it was yet another victory for class-action lawyers -- and it gave food marketers one more reason to be nervous, even if they have followed government guidelines.

Put simply, health advocates and their attorney allies are on a roll, gaining legal momentum that started during the Bush administration, when activists began taking their cases to court instead of waiting for the government to act. And even as the Obama administration gets a bit more aggressive in enforcing food-marketing rules, there are no signs that the lawsuits will stop. "The class-action bar is just pounding the food industry," said Linda Goldstein, a leading ad industry lawyer with Manatt, Phelps & Phillips.

The Campbell case involves four New Jersey women who allege they were fooled into buying more-expensive tomato soup labeled "25% less sodium," when it in fact contained about the same amount of sodium as the company's regular tomato soup. The suit got a boost last month when a federal judge refused to dismiss it, despite arguments by the foodmaker's lawyers that it followed Food and Drug Administration regulations.

The ruling follows one of the more notable marketer losses last year, when Dannon agreed to set up an up-to-$45- million fund to pay consumers alleging the company falsely advertised the digestive benefits of Activia and DanActive yogurts. The same law firm that brought that case won a big victory last month in a similar class-action involving General Mills' Yoplus yogurt when an appeals court agreed to allow the suit to proceed.

Industry lawyer Ken Odza, who runs the "Food Liability Law Blog," said class-action lawyers are targeting food companies after running low on other opportunities, including asbestos and tobacco claims, as well as drug cases, which he said are declining because of a lack of new pharmaceutical products to sue over. "Food-product labeling claims have been seen as a new opportunity for different segments of the plaintiffs bar," he said.

Food-liability attorneys warned about the trend in documents prepared for a defense attorney's group called DRI. Defense attorneys outlined the class-action lawyers' strategy this way: The claims involve "small-dollar" fraud claims "aggregated over millions of products sold." And "often the plaintiffs' strategy is to achieve class certification and then leverage the threat of a judgment into a settlement that involves a handsome payment of attorney's fees."

Nutrition activists and plaintiffs' attorneys say food companies deserve what's coming after being overly aggressive in marketing products in an attempt to woo customers during the economic downturn.

"They have gone far, far, far beyond what they have any substantiation to claim with regard to food products and their benefits. And it's all to make a buck," said Tim Blood, a plaintiffs lawyer with Blood, Hurst & O' Reardon. The San Diego-based law firm was formed last year with a mission of exclusively focusing on false advertising claims. Sure enough, it is involved in many of the big cases, including the suits against Dannon and General Mills. Last year, the firm was involved in a settlement with Wm. Wrigley Jr. Co. over allegations that the marketer falsely advertised the "germ kill" benefit of magnolia bark extract in Eclipse gum and mints. An up to $7 million fund was established to reimburse consumers by up to $10 each.

Another big player is The Center for Science in the Public Interest, a health-and-nutrition consumer-advocacy group. The group formed the "Litigation Project" in 2004 during the Bush administration to counter what it called the "shameful low point" of enforcement by the FDA, Federal Trade Commission and U.S. Department of Agriculture. The group has been involved in some 20 lawsuits, including a complaint filed in a California court last year that seeks to stop McDonald's from using Happy Meal toys to market directly to kids. The group scored a big win last year when a federal court refused to throw out a case alleging that Coca-Cola improperly markets health attributes of its Vitaminwater brand.

Campbell sought to dismiss the current case, saying the "25% less sodium labels" did "not make a comparison to Campbell's traditional condensed tomato soup, but instead accurately draws a comparison to the average sodium content of a soup category," which it said complies with FDA regulations. But U.S. District Judge Jerome Simandle in March ruled that there was enough evidence of potentially misleading labeling in possible violation of FDA regulations, and he allowed the case to proceed. In a finding that especially unnerved industry lawyers, he said "the fact that the labels were literally true does not mean they cannot be misleading to the average consumer."

Ms. Goldstein, who is not involved in the case, said: "The notion that you could be literally compliant with the labeling requirement but the labeling can still be found to be misleading could potentially open the floodgates for more class-action litigation." She added: "It's a sober reminder to marketers that truthful labeling and labeling that complies technically with the regulations of the FDA can still be subject to challenge."

Campbell told Ad Age it has "confidence in the accuracy of our labels." But the marketer added that "we no longer produce the 25% less sodium product and have retrieved as much as possible from the market."

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