Evaluate Now or Litigate Later

by Justin J. Prochnow, shareholder, Greenberg Traurig, LLP

Compliance with the laws and regulations enforced by FDA, FTC and other regulatory agencies should always be a primary goal for companies. No company wants to receive a missive from FDA in the form of a warning letter or find out FTC has it opened an investigation. Recently, however, there is another reason for regulatory compliance that, in many cases, is more significant to companies than any potential action from regulatory agencies. A wave of civil litigation has swept across the United States and companies in the cosmetic industry have, by no means, been left out of the fray.

While the United States has steadily grown more litigious over the year—every warning you now see on a label or package is likely the direct result of someone suing a company for allegedly not providing clear enough information—litigation against companies regulated by FDA, such as foods, beverages, supplements and cosmetics, for labeling and marketing claims has seemed to exponentially explode in the last year or two. It seems that every day or two, a new action is filed against a company for some sort of alleged labeling violation, ranging from claims that a product is “all natural" when it allegedly is not to claims that a product does not really provide the benefits that are touted.  Recent actions against cosmetic companies have included allegedly improper "all natural" claims and claims animal testing did take place when claims of no animal testing were made. What previously may have been viewed as, at worst, a labeling violation that might elicit a FDA warning letter, has now frequently appeared as the centerpiece of a plaintiff’s complaint.

And these actions are generally not small, county court actions for a few dollars. Most of these cases are brought as proposed class action cases seeking hundreds of thousands, if not millions, of dollars on behalf of alleged “aggrieved" consumers. These actions are most often brought in California because of the laws like the Consumers Legal Remedies Act (CLRA) or the California Unfair Competition Law that provide plaintiffs’ lawyers with broad statutes for unfair and deceptive trade practices. When Prop 65 is added to the mix, California’s statute mandating that companies give notice of certain chemicals in their products that the State of California has determined are harmful to health, it is a wonder that anyone even sells products in California anymore.

This wave of civil litigation is not likely to subside any time soon either. Until there are repercussions for plaintiffs that bring unwarranted or inane lawsuits, such suits will continue to be brought as plaintiffs and, more accurately, plaintiffs’ lawyers attempt to cash in. Recognizing the opportunity, plaintiffs’ lawyers have become much more sophisticated in their knowledge of the labeling regulations and other laws and regulations enforced by FDA and FTC. All of this means that, more than ever, companies must closely review all of their labels and their labeling, marketing and advertising materials to ensure that they are in full compliance and understand the risks associated with certain claims. Hopefully by doing so, vigilant companies can avoid being one of the newest statistics to add to the litigation numbers. When is the last time you took a look at your labels?