Barbara’s Bakery and Naked Juice Settle GMO Class Actions and Agree to Third-Party Substantiation of Non-GMO Labeling

by Morrison & Foerster LLP - Class Dismissed
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Class actions challenging “all natural” labels on products allegedly containing genetically modified organisms (GMOs) are all the rage in California. The jury is still out on how these claims will ultimately hold up, but some litigants don’t want to find out. Recently, both Barbara’s Bakery and Naked Juice agreed to settle the cases pending against them, offering more than the typical cash fund and labeling changes we often see in these settlements. In particular, both companies agreed to participate in third-party substantiation of “non-GMO” claims they may make in the future—filling in the gap of the lack of FDA regulations governing GMO labeling. [Note that the FDA may soon weigh in on the use of “all natural” labels for products allegedly containing GMOs. See our post here.]

On June 26, 2013, Judge Breyer, in the Northern District of California, preliminarily approved a class settlement involving a variety of Barbara’s Bakery products that allegedly contain GMOs and represent that they are “all natural.” See Trammell v. Barbara’s Bakery, Inc., No. 12-02664-CRB (N.D. Cal.) (Dkt. No. 58). The settlement creates a $4 million fund, out of which claimants can receive between $5 and $100. All costs, including up to $1 million in attorneys’ fees, will be deducted from the fund. 

Shortly after, on July 3, 2013, the parties in a case challenging Naked Juice’s labels asked Judge Kronstadt, in the Central District of California, to approve their settlement as well. See Pappas v. Naked Juice Co. of Glendora Inc., No. 11-08276-JAK-PLA (C.D. Cal.) (Dkt. No. 119). Naked Juice faced claims challenging its “all natural” and “non-GMO” statements based on the alleged presence of GMOs in addition to other unnatural and synthetic ingredients. It agreed to fund a $9 million settlement, granting up to $75 to claimants with proof of purchase and between $5 and $45 without proof of purchase. Attorneys’ fees not to exceed $3.12 million, as well as other costs, will be deducted from the fund.

Even more notable than these price tags is the injunctive relief. Predictably, the companies agreed to remove “all natural” label statements. But both companies also agreed to substantiate any “non-GMO” claims through third-party verification projects, effectively filling in the FDA’s regulatory gap. Barbara’s Bakery agreed to participate in the non-profit Non-GMO Project’s product verification program. If the company complies with that program, it can include a Non-GMO Project Seal. These changes will cost the company approximately $1.1 million to implement and another $1.2 million per year going forward. Similarly, Naked Juice agreed to substantiate all “non-GMO” claims, establish a third-party verification program for testing the accuracy of “non-GMO” claims, hire a quality control manager to oversee the independent testing, and establish a database to track and verify product ingredients.

These are not your average food-labeling settlements. Of course, the defendants very likely had other business reasons to settle the GMO claims and may have already been considering making similar changes. The settlements reach into the realms of ingredient sourcing and substantiation, quality control, and even data management. And they go where the FDA, so far, has not. While the FDA has not directly said whether GMOs are consistent with “natural” labels, it also hasn’t been silent on GMO labeling. In a guidance document, it concluded, “The agency believes that the practices and record keeping that substantiate the ‘certified organic’ statement would be sufficient to substantiate a claim that a food was not produced using bioengineering.”¹ (Emphasis added.) It cautioned against “GMO free” claims, however, due to the difficulty of testing and because the FDA has not established threshold levels of bioengineered material that would be consistent with that claim. Nonetheless, Naked Juice has agreed to turn to Eurofins GeneScan to test its products and apply a standard at least as strict as that set forth in Regulation (EC) No 1892/2003 of the European Parliament and of the Council of 22 September 2003, which permits no more than 0.9% GMO content in each ingredient and only when such presence is adventitious. Foreseeing the unpredictable regulatory landscape, the injunctive relief requirements in both settlements will expire after three years or upon changes to applicable regulations or laws that would require label changes. And in Barbara’s Bakery’s settlement, the injunctive relief will also expire if new regulations explicitly allow “all natural” labels on GMO products.

While litigants are showing that they are willing to take matters into their own hands and negotiate their own labeling standards, the question remains as to whether the FDA will step in to fill the regulatory gap.


¹ FDA, Guidance for Industry: Voluntary Labeling Indicating Whether Foods Have or Have Not Been Developed Using Bioengineering (Draft Guidance) (Jan. 2001), available here.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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