Food Based Country and Region of Origin Litigation

“There are three things that matter… Location, Location, Location.” – Lord Harold Samuel (founder of one of Britain’s largest real estate companies)

Country and region of origin litigation (also known as “COOL”, but perhaps better termed as “ROOL” or “CROOL”, depending on one’s perspective) is a growing area of concern for food companies. Globalization has resulted in a dramatic increase in the number of companies and supply chains that transcend national or regional boundaries. For many food products, however, the country (or region) of origin is of significant importance to the consumer. One need think no further than the concept of terroir when it comes to French wines or Columbian coffee¹, or perhaps Wisconsin cheese curds or authentic Chicago hot dogs, to appreciate that the location from which a food product originates is prized by the consumer and commands a premium price.

Indeed certain states have specific laws that prohibit marketing and labeling that could cause consumer deception regarding the origin of a product. For example, the California Consumer Legal Remedies Act states that: “The following unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or that results in the sale or lease of goods or services to any consumer are unlawful…Using deceptive representations or designations of geographic origin in connection with goods or services.”). See e.g. California Civil Code §1770(a).

This article explores several recent cases involving the origin of food products. These cases underscore the risks faced by companies when supply chains cross international or regional borders and conflict with the commonly assumed loci for food production.

Risks Associated With Changing Location of Manufacture

“Cause, remember: no matter where you go... there you are.” - Buckaroo Banzai
(physicist, neurosurgeon, test pilot, and rock star)

In the past decade, there have been a spate of mergers among food companies, which have resulted in the creation of international food conglomerates.² With these mergers, the site of food manufacturing has often moved, as consolidation occurs and companies try to gain efficiencies by relocating production closer to the point of sale. Consequently, manufacturing can become divorced from the commonly believed origin of a product. As seen below, this can spell trouble for food companies since consumer confusion can lead to lawsuits.

Case Study One – Beck’s Beer

“On victory, you deserve beer, in defeat, you need it.” – Napoleon

Bremen – a town in northern Germany – is renowned for three things: the Bremen Town musicians from the Brothers Grimm fairy tale; Werder Bremen, a soccer team in the Bundesliga league; and Beck’s beer. Only the last is broadly known.

Beck's beer originated and was brewed in Bremen, Germany in 1873, and continued to be for the next one hundred years. But, in 2012, after consolidation among beer companies, the production of Beck’s beer sold in North America was moved to Anheuser-Busch’s facilities in St. Louis, Missouri.³

Despite the fact that Beck’s beer sold in the United States was now brewed more than 5,000 miles from Germany, the labels of Beck’s beer still claimed the beer “Originated in Germany,” was made with “German Quality,” and “Brewed Under the German Purity Law of 1516.”

In 2013, several plaintiffs filed a lawsuit against Anheuser-Busch for allegedly misleading consumers as to the origin of Beck’s beer in the case titled, Marty v. Anheuser-Busch Companies, LLC. The consumers claimed they had overpaid for Beck’s beer by paying a premium price for what they believed was an imported beer when, in fact, Beck’s is a domestic beer. The consumers brought claims for violation of the laws of Florida, New York and California, where the three plaintiffs resided. The case was brought as a class action; a procedural device that allows the claims of many individuals to be represented by a single plaintiff or a small group of plaintiffs. In other words, the three plaintiffs sought to represent not only their own claims, but also the claims of all other persons who purchased Becks’ beer within the past several years. This is significant, as the damages of individual purchasers of a food products are often small, particularly when compared to the expense of litigation. However, when those damages are multiplied by the millions of persons who purchased the product, the results are often in the hundreds of millions of dollars, making the costs and risk of litigation worthwhile. As the esteemed former Seventh Circuit Judge and University of Chicago lecturer Richard Posner so articulately stated, “[t]he realistic alterative to a class action is not 17 million individual suits, but zero individual suits, as only a lunatic or a fanatic sues for $30.”⁴ This is what the class action device achieves, relief for millions of consumers for their everyday transactions.

Anheuser-Busch moved to dismiss the case, arguing that no reasonable consumer could be deceived by the labeling and marketing of the product given that the labels on the beer stated that it was a ““Product of USA, Brauerei Beck & Co., St. Louis, MO” and also contained the words “BRAUEREI BECK & CO., BECK'S © BEER, ST. LOUIS, MO.”⁵ The court rejected this argument, holding that the “Product of USA” disclaimer on the labels was blocked from plain view by the carton packaging. The court reasoned: “[A] consumer would have to either open the cartons of twelve-pack bottles and twelve-pack cans or lift the bottle from the six-pack carton in order to see the ‘Product of USA’ disclaimer … A reasonable consumer is not required to open a carton or remove a product from its outer packaging in order to ascertain whether representations made on the face of the packaging are misleading.” ⁶

Furthermore, the court held that “the statement “BRAUEREI BECK & CO., BECK'S © BEER, ST. LOUIS, MO” was not sufficiently descriptive to alert a reasonable consumer as to the location where Beck's is brewed.⁷ Although this statement contains the words “St. Louis, Mo,” the court found that “there is nothing in the statement which discloses where Beck's is brewed.”⁸ As a result, it denied the motion to dismiss and allowed the case to proceed.

Shortly after issuance of the court’s order denying the motion to dismiss, the parties entered into a settlement. The terms of the settlement provided for partial refunds to consumers valued at $20 million.⁹

Case Study Two – Kona Brewing Company

“Hawaii is a state as well as a state of mind.” – The Honorable Beth L. Freeman

It is important to note that litigation based on place of origin is not just limited to countries, but also includes identifiable geographic areas within countries. This concept is most evident with respect to wines, where different regions within the same country – Bordeaux versus Beaujolais in France or Napa versus Russian River in California – can make a great difference in taste and price. As the case of Broomfield v. Craft Brew Alliance, Inc., case no. 17-cv-1027-BLF, 2017 WL 3838453 (N.D. Cal. Sept. 1, 2017) demonstrates, this concept is not limited to fine wines but can apply to a wide array of food products, where a food is associated with a particular region.

At issue in Broomfield was beer sold under the Kona Brewing Company brand name, including flavors styled as “Longboard Island Lager,” Wailua Wheat Ale,” Lemongrass Luau,” and “Hanalei Island IPA,” among others. The packaging for each variety of beer was adorned with Hawaiian-related images such as orchid flowers, volcanoes, palm trees, surfers, and hula dancers.

Historically, the beers were brewed in Kona, Hawaii. In 2010, however, the company was acquired by a publicly traded conglomerate, and the manufacture of Kona beers sold on the U.S. mainland was transferred to Oregon, New Hampshire, and Tennessee.

In 2017, three consumers filed a class action in federal court, alleging that the Kona branded beer sold on the mainland was misleadingly labeled because it led consumers to believe that the beer was brewed in Hawaii when it was not. The consumers asserted claims under state consumer protection laws, including California’s Consumer Legal Remedies Act (cited above in the introduction), which expressly prohibits misrepresentations as to the origin of a product.

The defendant – Craft Brew Alliance, Inc. (“CBA”) – moved to dismiss the complaint, arguing that no reasonable consumer would either believe or care that the beer was brewed in Hawaii.¹⁰ The court disagreed, holding:

Hawaii is a state as well as a state of mind. When adults want to escape the mainland, they can go to their local grocery store, purchase a package of Kona Brewing Company beer, and feel as though they are transported to the beaches of Hawaii. This case is about the importance of where that beer actually is brewed.¹¹

CBA also argued that it disclaimed that the product was brewed in Hawaii by listing on the bottles themselves all of the places the beers are made including on the mainland.¹² The court rejected this argument and held that the disclaimer on the labels of Kona beer is not enough to contradict the representations on the outer packaging and that, under well-established legal precedent, reasonable consumers are not required to investigate to ascertain whether representations made on the face of the packaging are misleading.¹³

The court further explained:

The disclaimer on the Kona beer label lists five locations, including “Kona, HI, Portland, OR, Woodinville, WA, Portsmouth, NH, and Memphis, TN” which encompass “all locations where the beers are brewed.” A list of multiple locations on a product label does not amount to an explicit statement that the beer is brewed and packaged at a particular location. … Particularly the inclusion of Kona, Hawaii on the list mitigates the disclaimer's effectiveness, since Plaintiffs allege that no bottled or canned beer bearing the Kona label is actually brewed in Kona, Hawaii. Therefore, even if the Court was to consider the label in the context of the packaging, a reasonable consumer could still be deceived because the list of brewery locations does not “alert a reasonable consumer as to the location where [Kona beer] is brewed.”¹⁴

The court then denied the majority of CBA’s remaining arguments and allowed the case to proceed. The case ultimately resulted in a class action settlement.¹⁵

Risks Associated With International Supply Chains

“The Supply Chain stuff is really tricky.” – Elon Musk (CEO of Tesla)

Country of origin litigation also is a risk where food production involves an international or multi-regional supply chain. This is especially the case where a food or ingredient commands a premium when it comes from a particular country or region.

Case Study – Filippo Berio Olive Oil

Filippo Beriois a popular brand of olive oil that originated in Lucca, Italy in 1867. The Salov North America Corporationimports and markets the Filippo Berio brand olive oil in the United States.

The words “Imported from Italy” appeared prominently on the front label of each bottle of Felippo Berio olive oil sold in the United States. However, the olives from which the oil is made are grown and pressed in other countries such as Spain, Greece and Tunisia, after which the oils are shipped to Italy where they are blended and bottled for export.

In 2014, a consumer filed a lawsuit in federal court in the Northern District of California, titled Kumar v. Salov North America Corp., case no. 14–CV–2411–YGR, 2015 WL 457692 (N.D. Cal. Feb. 3, 2015). He alleged that the “Imported from Italy” statement on the product labels was false and misleading, and violated federal regulations and state law concerning country of origin and misbranding of food products. ¹⁶

The company defendant moved to dismiss, arguing that “no reasonable consumer would understand ‘Imported from Italy’ to mean that the product was made entirely from Italian-grown olives.”¹⁷ The defendant also argued that the back label of the bottle disclosed that the olives did not come solely from Italy but rather also originated from Spain, Greece and Tunisia.¹⁸

The court rejected these arguments by the company, noting that reasonable consumers should not be expected to look beyond misleading representations on the front of the bottle to discover the truth from smaller text displayed elsewhere.¹⁹ The court refused to dismiss the complaint, concluding that the plaintiff should be given an opportunity to show at trial that reasonable consumers perceive “Imported from Italy” to mean that the product was made exclusively from olives grown in Italy.²⁰

After several more rounds of litigation, including a successful motion to certify the case as a class action, the matter settled with the company changing the labelling and paying partial refunds to consumers.²¹

Conclusion

Jake: How are you gonna get the band back together? Those cops have your name, your address

Elwood: They don’t have my address. I falsified my renewal. I put down 1060 West Addison.

Jake: 1060 West Addison? That’s Wrigley Field.

Jake and Elwood Blues (a.k.a. The Blues Brothers) 

As the above cases reveal, telling the truth about the origin of a food product is important. While this may seem obvious, it becomes trickier when the “origin” of a product has changed, or is murky because of what can be implied through the use of words or images that could convey the product is from a place that it in fact, is not.

When food companies change the site of manufacturing either through mergers or changes in supply chain, they need to be aware that consumers’ expectations regarding product origin might no longer be met. This could result in significant exposure to COOL, ROOL, or CROOL liability.

Furthermore, even disclosures as to the new origin of a product may be deemed legally inadequate, particularly if the disclosures are provided in a manner that are not readily evident to the consumer, such as on the back of a product or in small print.

Accordingly, with any changes to production or supply chains, it is important for a manufacturer to review the marketing and labeling of any food products that may have strong association to a place of origin. Consumer surveys (either in-house or through outside third-parties) are recommended to determine whether changes in sourcing or location of manufacturing potentially could mislead consumers. If so, it is important to update the marketing and labeling to clearly inform consumers of the new origin of the product. Otherwise, it could result in class action litigation due to consumer confusion. In cases of changes to the source of supply or site of manufacturing, it is caveat venditor or seller beware.

Michael R. Reese
REESE LLP
New York, New York
mreese@reesellp.com

(Michael Reese is a consumer protection class action attorney who litigates cases across the United States, including in New York, California, and Illinois)