ALERT: California Proposition 37

Current polling shows the gap closing on those for and against California's Proposition 37, the "Right to Know Genetically Engineered Food Act."[1] Whether you are for or against Proposition 37, the fact that the proponents and opponents are diametrically opposed as to the interpretation of critical aspects of the proposition will ensure litigation. If passed, the use of the term "natural" or a similar term in retail food labeling and advertising for any processed food, regardless of whether it contains genetically engineered ingredients, will be in question.

The text of Proposition 37 includes:

if a food meets any of the definitions in section 110808(c) or (d), and is not otherwise exempted from labeling under Section 110809.2, the food may not in California, on its label, accompanying signage in a retail establishment, or in any advertising or promotional materials, state or imply that the food is "natural" "naturally made", "naturally grown", "all natural" or any words of similar import that would have any tendency to mislead any consumer.

Section 110808(d) defines "processed foods" as:

any food other than a raw agricultural commodity and includes any food produced from a raw agricultural commodity that has been subject to processing such as canning, smoking, pressing, cooking, freezing, dehydration, fermentation or milling.

Opponents of Proposition 37 claim that this broad and open-ended definition of "processed foods" will lead to litigation brought by trial attorneys suing food companies for any statement of "natural" on labels or advertising, and will use the law enacted upon certification of the election as subsequent proof of their interpretation of that term.

Opponents also claim that, as worded, the proposition eliminates plaintiff's burden of proof as to causation and limits the proof required to show damages. In this regard, Proposition 37 presents the precise shortcomings that caused voters to pass Proposition 64, which corrected the original Business and Professions Code § 17200, the Unfair Competition Law ("UCL"), that did not require a showing of damages or reliance on the alleged violation.

Proposition 64's drafters noted:

These unfair competition laws are being misused by some private attorneys who … file frivolous lawsuits as a means of generating attorney's fees without creating a corresponding public benefit … File lawsuits where no client has been injured in fact … File lawsuits for clients who have not used the defendant's product or service, viewed the defendant's advertising, or had any other business dealing with the defendant …

It is the intent of California voters in enacting this act to eliminate frivolous unfair competition lawsuits…to prohibit private attorneys from filing lawsuits for unfair competition where they have no client who has been injured in fact under the standing requirements of the United States Constitution…

Proposition 37 opponents claim that these words will apply to an enacted Proposition 37 as they were to the Unfair Competition law.

Proponents of Proposition 37 claim that lawsuits will not be brought as long as producers properly label and advertise their products. Specific to the natural issue, proponents claim that courts would interpret any lawsuit brought under the law within the context of the law, so would necessarily only interpret the word "natural" when it was referring to genetically modified ingredients. Other proponents claim that if a food has undergone any processing, it is by definition not "natural," so should not be labeled as such.

SUMMARY

We believe that even though Proposition 37's intent is to address labeling of genetically modified ingredients, it will have the unintended consequence of increasing the amount of litigation brought regarding "natural" claims on labeling and in advertising. There has been a dramatic increase in the number of lawsuits on "natural" claims over the past year, and we expect that passage of Proposition 37 will add to the uncertainty regarding the use of this, and similar terms. The litigation department at Keller and Heckman is involved in numerous cases under the CLRA, UCL, and FAL, and is intimately familiar with these cases.