Supreme Court Paves the Way for Organic Food Fraud Suits

ThinkstockPhotos-493451151The California Supreme Court just handed down a decision that’s been hailed by the Recorder as “boon for plaintiffs bar.” In Quesada v Herb Thyme Farms (PDF), the supreme court unanimously held that claims for fraud by intentionally labeling conventionally grown food as organic aren’t preempted by the federal Organic Foods Act—so it’s a green light for plaintiffs to sue under California’s consumer protection laws and reap the remedies found there.

The complaint in Quesada alleges that Herb Thyme engaged in fraud by intentionally labeling conventionally grown herbs as organic and then kept the additional premiums that organic produce commands. The supreme court considered the purposes and objectives of the federal Organic Foods Act and found that they don’t serve as an obstacle to state law claims; rather, it found “state lawsuits alleging intentional organic mislabeling promote, rather than hinder, Congress’s purposes and objectives.” In so ruling, the supreme court overturned the court of appeal’s decision that only the federal government can enforce organic labeling laws.

Being permitted to sue companies that mislabel food as organic under California’s consumer protection laws is very exciting to plaintiffs’ lawyers, as it will open to door to significant remedies, including attorney fees. And, of course, the defense side sees bad times ahead—one attorney who specializes in food-related litigation predicted to the Recorder that “the ruling will lead to more lawsuits and higher costs for organic products.”

Regardless of side, the supreme court’s decision should get attorneys to bone up on California’s consumer protection laws, including the Consumer Legal Remedies Act (CLRA) (CC §§1750–1784).

The CLRA provides for actual and punitive damages, injunctive, and restitution for consumers injured by certain unfair methods of competition or unfair or deceptive practices in the sale of consumer goods. In addition, if the consumer is a senior citizen or is disabled, he or she may be awarded an additional sum if he has suffered substantial physical, emotional, or economic damage as a result of the defendant’s conduct. CC §1780(a)–(b).

And the music to plaintiffs’ counsel’s ears: A prevailing plaintiff may also recover court costs and attorney fees. (But keep in mind that a prevailing defendant can get reasonable attorney fees if it can show that the plaintiff’s prosecution of the action was not in good faith under CC §1780(e).)

There’s a way for defendants to get out of these remedies: No damages may be recovered if the person alleged to have employed or committed an unlawful method, act, or practice (1) proves that the violation was unintentional and resulted from a bona fide error, notwithstanding the use of reasonable procedures adopted to avoid such errors, and (2) makes an appropriate correction, repair, or replacement of the goods or takes other appropriate remedial action. CC §1784.

Take note of the special notice and demand procedures that plaintiffs must follow before bringing an action under the CLRA: At least 30 days before a consumer may commence an action for damages under the CLRA, he or she is required to

  • notify the prospective defendant of the particular violations complained of, and
  • demand that the goods or services alleged to be in violation be repaired, replaced, or otherwise corrected.

The notice must be in writing and sent by certified or registered mail to the place where the transaction occurred or to the person’s principal place of business in California. CC §1782(a). The consumer can’t maintain an action for damages if an appropriate correction, repair, replacement, or other remedy has been given (or agreed to be given within a reasonable time) within 30 days after receipt of the notice. CC §1782(b).

No notice or demand is required for an action for injunctive relief under a specific provision of CC §1770. See Morgan v AT&T Wireless Servs., Inc. (2009) 177 CA4th 1235, 1260. The consumer may amend the complaint without leave of court to include a request for damages but must wait at least 30 days after the filing of the initial complaint and must also comply with the notice and demand requirements of CC §1782(a). CC §1782(d); 177 CA4th at 1260.

An action brought under the CLRA must be brought within 3 years after the unlawful act was committed. CC §1783.

Get more information on bringing CLRA actions in CEB’s California Law of Contracts, chaps 6, 10, and 12. On litigating unfair competition claims, check out CEB’s California Business Litigation, chap 3.

© The Regents of the University of California, 2015. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.

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