American Bar Association: Consumer Litigation Poised to Increase in California if Proposition 37 Is Passed

October 26, 2012

By Adam M. Reich

"Never stir up litigation. A worse man can scarcely be found than one who does this." One of the most pivotal figures in American history, Abraham Lincoln, penned these words. While Lincoln intended his advice for prospective lawyers, it is especially relevant to California voters heading to the polls on November 6, 2012, to determine the fate of Proposition 37. This state ballot initiative will, if passed, expand opportunities for consumer litigation against food producers, manufacturers, and related retailers.

The expressed purpose of Proposition 37, also known as the California Right to Know Genetically Engineered Food Act, is "to create and enforce the fundamental right of the people of California to be fully informed about whether the food they purchase and eat is genetically engineered and not misbranded as natural[.]" To accomplish this broad goal, Proposition 37 authorizes "any person" to sue food producers, manufacturers, and related retailers who fail to abide by strict labeling requirements and restraints for raw and processed foods produced from organisms with artificially altered genetic material. Proposition 37 encourages courts to "liberally construe[]" its language when determining these suits, and authorizes a vast array of remedies.

Specifically, Proposition 37 mandates three labeling changes, effective July 1, 2014. First, the label of any "raw agricultural commodity" offered for retail sale that has been or may have been at least partially genetically engineered must contain the phrase "Genetically Engineered" in "clear and conspicuous words." This terminology must appear either on the front of the product package or, in the case of products that are not individually packaged or otherwise labeled, on a label on the retail stores shelf or bin where the "raw agricultural commodity" is displayed. Second, the label of any "processed food" (broadly defined to mean "any food other than a raw agricultural commodity") that is or may have been produced with at least some genetically engineered organism must clearly and conspicuously display on the front or back of the product's packaging either "Partially Produced with Genetic Engineering" or "May be Partially Produced with Genetic Engineering." Third, any label or corresponding advertisement, promotional material, or in-retail store signage for any "genetically engineered" food or "processed food," unless specifically exempted by Proposition 37, may not "state or [even] imply that said food is 'natural'[,] 'naturally made', 'naturally grown', 'all natural' or any words of similar import that would have any tendency to mislead any consumer."

Food producers, manufacturers, and related retailers who violate Proposition 37's labeling regulations could face dire consequences. Proposition 37 relaxes pleading standards for plaintiffs and leaves potential defendants exposed to windfall judgments. For example, plaintiffs may obtain injunctive relief even if they do not allege facts necessary to show, or tending to show: (1) a lack of adequate remedy at law; (2) irreparable damage or loss; and (3) unique or special individual injury or damages. Proposition 37 also statesthat a violation of any of its provisions "shall [automatically] be deemed a violation of [California] Civil Code section 1770(a)(5)," without requiring the plaintiff to establish any specific damage from, or prove any reliance on, the alleged violation. This particular provision is especially notable because California Civil Code section 1770(a)(5) is part of the Consumer Legal Remedies Act (CLRA), a statute which authorizes recovery of punitive damages. Beyond injunctive relief and punitive damages, Proposition 37 also expressly indicates that violators may be liable for damages "in at least the amount of the actual or offered retail price of each package or product" and "reasonable attorney's fees and all reasonable costs incurred in investigating and prosecuting the action as determined by the court."

Recent polls suggest California voters may disregard Lincoln's words of caution and pass Proposition 37 on November 6, 2012. If voters act accordingly, lawyers need to be prepared for an inevitable uptick in consumer litigation in California.

Adam Reich, Paul Hastings LLP, Los Angeles written and published by The American Bar Association