The Startup CPG Podcast

00:00
Daniel Scharf
All right, welcome, everybody, to the startup CPG podcast. So today we're joined by Lauren Handel from Handel Food Law. Lauren specializes in food, beverage and supplement businesses. She's got a rich background from McDermott, Will and Emory LLP, and she brings over two decades of experience, having now transitioned her skills to advocate for independent businesses. One of the hot topics in the industry has been the volume of lawsuits against emerging brands, areas like labeling, disability compliance, and much more. Lauren's seen it all, and I've worked with her personally one of these kinds of suits. So I was really eager to get here on the podcast to give all of the brands out there a rundown of key areas where claims are being made these days and what you can do to try to avoid them. Lauren, welcome to the show.

00:48
Daniel Scharf
Can we just jump right in? And I'd love to ask you to tell us what got you interested in this world of CPG.

00:56
Lauren Handel
Yeah, thank you. Thanks for having me. I'm glad to be able to talk about this stuff. What got me interested. So you mentioned I had a previous life at a big firm where I did pretty much only litigation. It was a different kind of litigation, mostly representing really large companies.

01:18
Daniel Scharf
Litigation meaning in the courtroom like law and order style.

01:24
Lauren Handel
Not nearly as dramatic or exciting. Big cases that went on for months and months and for very big companies. And it was great experience for me as a lawyer. I really learned how to be a lawyer and honed skills, but I wasn't in love with what I was doing. And I had a personal, very strong interest in food, both as somebody who likes to eat and cook and go to restaurants and learn about culture through food. But also I became really interested in the food movement, as it's sometimes called. All of the businesses and organizations that are out there trying to improve our food systems by offering better, healthier, more environmentally sustainable options and kind of disrupt the existing food system. And I was really interested in that and figured out that there was a role for lawyers to play in that.

02:26
Lauren Handel
And so that's why I left my old firm and actually went and studied to focus on food and agriculture law and started my own practice.

02:37
Daniel Scharf
Yeah, and pretty interesting that you say, like, the role for lawyers to play, which, I mean, unfortunately, is a big role and probably an increasingly big role, keeps growing, just especially all the new brands. For me, it feels like if you start a brand these days, it's not if, but when you're going to face some kind of a claim or suit. So it is very good to know a good lawyer so I'm really happy to have you on here to talk about some of this stuff, but hopefully, after we drop all of these tips and knowledge from your experience, everybody will just get. Right, and no one's going to have any claims.

03:15
Lauren Handel
Right.

03:17
Daniel Scharf
You'll put yourself out of a job by just giving away all of the stuff that they would need you for.

03:23
Lauren Handel
Yeah. The goal is always prevention. Right. So that's mostly the role that I play.

03:30
Daniel Scharf
All right, so what I had asked Lauren, because she's done so much of this, and she's working across all the brands and seeing everything right now. I said, hey, can you just bring a list of what is the stuff that you're seeing the most out there when you get this horrible letter that appears on your doorstep someday about a claim that's coming? What's that most likely to be right now, and what can brands do about it? So I think before we jump into the most common claims, can you just tell me a little bit about litigation risk generally? So where is it coming from and how common is it?

04:04
Lauren Handel
Yeah, sure. So this is a very religious society that we're in, and our system in the United States makes it pretty easy to sue and expensive to defend. So like it or not, and there are good things about that, for sure, but it also creates an environment where there is money to be made on the plaintiff side, especially for plaintiffs lawyers who bring class actions, meaning a lawsuit where there is a plaintiff, one or maybe two, maybe three people who are named plaintiffs, but they're there to represent, in my experience, the kinds of cases I'm dealing with all consumers of a particular product that might be in a state or it might be nationwide or in several states.

05:02
Lauren Handel
And that type of litigation can be very lucrative for plaintiff's lawyers, because while the damages to any particular claimant, the person who bought a product, might be pretty small over the whole class of everyone who's bought that product, over the course of several years, the numbers get pretty high. And there are also state laws that make those types of lawsuits favorable for plaintiffs lawyers to bring because they allow for awards of attorneys fees in many cases, which is not the norm in our society. So usually each party pays their own way, which is what makes it difficult and expensive to defend against these kinds of lawsuits. So that's just kind of like the overall dynamic and the incentives at play. And so there is very active litigation in the food space and CPG more broadly.

06:00
Lauren Handel
But for the last, I don't know, I'd say ten to 15 years. The area of food labeling litigation has become a really hot area of class action litigation. But there can be other kinds of lawsuits, too. Competitors can sue each other over their labeling and advertising. That's less common. And there's also an alternative way that those sorts of claims can be brought outside of the courts in a more private way, in the national advertising division, which is part of the Better Business Bureau. So there are different ways that these issues could come up. But by far, the class action model of labeling litigation, where the allegations is that there's something false or misleading about a label, is the most popular kind of claim right now.

06:55
Daniel Scharf
Got it. And it seems like there are probably a couple of ways that a suit could come about, or a claim could come about. Like, you could have a consumer out there who finds your products and feels like they've somehow been deceived or wronged by your product, and they go out and find a lawyer to represent, like. Like a highway billboard, like, have, you know, targeted or whatever. And then they could find a lawyer who would then get in touch with you.

07:21
Daniel Scharf
And then another that I also have heard of is there are law firms out, and I live in California, and there's a lot of that happening here, where they have pretty strict consumer protection laws, where it's a law firm that they see a lawsuit that's out there about a specific thing, and then they know that's a hot button right now, that there's some money in it, and they may go and just kind of search the market for somebody that might also be committing a similar kind of infraction and then actually go out and find people who want to complain about it, like, even using things like Instagram to say, like, hey, have you bought this product? Great, you want to sue them with us and maybe find one person or put that together, even potentially as a class action. Is that right?

08:01
Daniel Scharf
And are there any other ways?

08:02
Lauren Handel
Yes. So with the labeling and advertising type litigation, it is largely driven by the plaintiff's lawyers and not by the consumer who feels wronged. So it is very much the case that there's a set of plaintiffs, law firms that are focused on this type of litigation. They identify particular issues that they want to target and then go out and find all the products that they can that have this issue or that present this issue where they would have a potential claim, and then go out and find the plaintiffs to be the name plaintiff on the complaint. But I've also seen the other. It is less common. But I have had experience with clients where there actually was a plaintiff who felt wronged by something who went out and found the lawyer.

08:58
Lauren Handel
And then you're in a very different situation where you're dealing with a plaintiff who really feels like some injustice has been done. And that's different than the kind of business of class action plaintiffs lawyers.

09:12
Daniel Scharf
Yeah, I just watched the friends episode where Phoebe finds a finger in her soda. And so I imagine in that instance, she's reaching out to a lawyer rather.

09:21
Lauren Handel
Than a bunch of very unusual calls.

09:28
Daniel Scharf
Like that from the people looking for their finger.

09:31
Lauren Handel
No.

09:33
Daniel Scharf
Just kidding.

09:34
Lauren Handel
Just kidding.

09:40
Daniel Scharf
And then in that instance, so what's the process like when that happens? Okay, so let's say somebody finds a lawyer and now they're going to get in touch, or the plaintiff's lawyers then finally find the person to bring a suit. What's going to happen after that? If you're a brand waiting for the shoe to drop on this one, what's your experience going to be like?

10:02
Lauren Handel
Yeah, so you might get a letter, as you mentioned, and that's because under certain statutes, it's required for the plaintiff to send a pre suit notice letter. And the idea of that is it gives the defendant a chance to make a correction and resolve the issue before it actually ends up in court. So often that will happen that there is some letter saying it might even have a draft complaint attached saying, we're going to sue. For this reason, I represent such and such a party, and you have so many days to respond to this before we file suit. Sometimes you'll just get served with a lawsuit or find out that a lawsuit has already been filed. And so that just is kind of a strategy decision.

10:50
Lauren Handel
In states where the underlying cause of action doesn't require a presuit notice letter, the plaintiffs might decide to just go ahead and sue.

10:59
Daniel Scharf
That's interesting. I didn't know that. So I just assumed like, hey, they're all just going to reach out to you and try to get you to send them a check for as much money as possible and not actually go through with it. But you're saying, no, actually, a lot of times they'll just go ahead and file it. Which you, as a brand, is the thing that you don't want to happen, probably, which is why you might settle in a lot of instances. But how common is that? Or where would you see that more likely to happen? Where they're just filing it instead of actually reaching out to you to try to settle it before doing that?

11:26
Lauren Handel
Yeah. So the pre suit notice letter is definitely more common for labeling cases. I think we're going to talk a little bit about the website ADA compliance kinds of cases. Those tend to be it just gets filed and the defendant finds out, usually because some other defense firm is monitoring the dockets of the courts where these cases are common and reach out to them and say, you've been sued, you might not have been served yet, but you've been sued for your website. So it just depends on the nature of the action. From the plaintiff standpoint, they might have a strategic reason to just go ahead and file and try to be, especially if they think it's an issue. We've been talking so far mostly about these consumer protection kinds of cases involving false or misleading or allegedly false or misleading labeling.

12:25
Lauren Handel
If it's a different kind of issue, like it's being prompted by an FDA warning letter or it's being prompted by a recall, plaintiff's lawyers will want to be the first to file a case so that they can keep control over it. So if they think it's an issue that's public enough and other lawyers might be sort of jumping on filing their own cases, they'll want to get out there first to be the first one to file.

12:52
Daniel Scharf
And then if they want to spin it into a class action, it's sort of the balls in their court. No pun intended. Yes, pun intended. All right. Sorry in advance if I do a couple more of those. Here we go. All right, so then let's say you get a letter, let's say then, and it's a presuit notice, and they say all the things that you've done wrong and how the person who is suing you has been wronged by them and what are they going to be looking for at that point? You're expected obviously to respond to them. What are brands typically doing in that situation and how quickly is it going to get to a dollar amount? Discussion?

13:33
Lauren Handel
Yeah. So it really depends on who you are as a brand, right? So this is the startup CPG podcast. We are focused on emerging early stage companies, right? Companies that tend to be smaller, and that is a different kind of analysis and strategy than if you are an established bigger brand, deeper pockets. At some point, things change from, we're trying to settle this as quickly and cheaply as possible, and especially if it's pre suit where it can still be confidential. Right. Once a lawsuit is filed, the complaint has been filed in court that becomes a public record. And so other lawyers in other parts of the country might find out about it and get the same idea. Right. So there are advantages to having a confidential early settlement for relatively cheap and I could talk about what I mean by relatively.

14:37
Lauren Handel
If you're a smaller brand, if you are a bigger company, you don't want a reputation for settling easy and early. Right. So you get to a certain size and you really have to fight back, especially since on the merits, many of these cases are defensible and are very difficult for the plaintiffs to prove. And there's actually not many that ever get to any sort of decision on the merits. So there's a different set of incentives depending on your size. But if you're smaller, you get that letter, you have an incentive to at least find out if the plaintiff's lawyers are talking about reasonable numbers, because what you're looking at is the cost of defending. Even if you have a winning case, even if you could ultimately prevail in the litigation, what is it going to cost you to get to that point?

15:36
Daniel Scharf
What is it going to cost to get to that point?

15:39
Lauren Handel
It could easily cost hundreds of thousands of dollars. Right. If you were going to have to go through full blown litigation, which in a class action is complicated, is more complicated than the single plaintiff case, because you have class action, class discovery in figuring out in the whole stage of the lawsuit and figuring out if a class can be certified, which is often where these cases are won or lost, because if the plaintiff can get a class certified now, those damages and numbers have gone from maybe a few dollars to maybe hundreds of thousands of dollars or even millions of dollars. So there are these various stages where there's important fights. Legal work is resource intensive and expensive.

16:31
Daniel Scharf
So even if you're a small brand, and is any suit going to cost you that kind of money if you actually take it to court, or if they don't get a class action certified, how much could a smaller suit run you? Is it going to be $10,000? Is it going to be $100,000?

16:52
Lauren Handel
So each case has to be evaluated on the specific facts of that case. It is very easy to state enough of a claim to draft a complaint as the plaintiff. That is good enough in our system and with the standards that we have for just initiating litigation to get past the motion to dismiss, which is the first opportunity when you're reserved with a complaint, you can either answer the complaint where you admit or deny the allegations, or you move to dismiss. And it is the relatively rare complaint that is really vulnerable on a motion to dismiss where you could actually just get the whole thing wiped out. Now, that has happened, though, in this type of litigation, and there's a particular type of case which we might talk about that. More and more of them are getting dismissed.

17:48
Lauren Handel
So you would really need to evaluate, do we have a potential to actually get this knocked out early? But if not, and in most cases, you don't, because usually some part of the lawsuit, even if you could get some of the claims narrowed or some of them dismissed, some part of it will continue. And then the next stage is discovery, which gets really expensive. So just to deal with the motion to dismiss, I'd say $10,000 would be not impossible, but still cheap, that you'd probably be looking at closer to 20,000 or $30,000 in legal fees to get through the briefing on it, the argument on it. And then you'll have to see how successful were you? And kind of, the longer the litigation goes on, the more work that is done on both sides, the more expensive it becomes to settle, too.

18:44
Lauren Handel
So again, this all goes back to incentives to try to settle early.

18:50
Daniel Scharf
Yeah. Hey, here's a dumb question. Do you as a lawyer, keep track of your record like a boxer would? Like how many wins and losses and knockouts, which I think would be early dismissals?

19:03
Lauren Handel
I would if I was still litigating like that. Right. So since I started this practice focused on food businesses, I actually have had one case that I've litigated, and it went all the way through trial. It was not a labeling lawsuit. I actually represented the plaintiff, and we won record in my practice. Now, what I am mostly focused on is preventing people from getting these, and then when they do get this letter or a complaint filed against them, seeing if we can resolve it with an early settlement, and if not, then I probably would not stay involved for the litigation.

19:45
Daniel Scharf
Okay, got it. All right, so let's say you respond to them and you say, okay, we see your claim. And to us, it is not valid for a bunch of reasons. But, hey, what's the number you guys are looking for in some way? What should you expect back from them at that point?

20:06
Lauren Handel
Yeah. So it depends on who you're dealing with. I'd say from my experience, the plaintiffs lawyers that tend to be sending these kinds of letters and threatening these kinds of lawsuits against really small brands know exactly what they're doing, know that they are targeting very small brands who aren't going to have a lot of money and are deliberately choosing to target those kinds of brands. Knowing the incentives that we've been talking about. They're not expecting huge amounts of money. They might ask for huge amounts of money initially, but they're not expecting huge amounts of money. I'm talking in the neighborhood of ten to 40, $50,000, which still sounds like a lot.

21:01
Daniel Scharf
You mean that's what they expect or that's what they'd ask for?

21:04
Lauren Handel
No, they might ask for way more than. They will almost certainly ask initially for way more than that. But what they would expect to get, it's going to depend partly on sales. And usually these conversations start with giving the plaintiff lawyer some idea of what the brand sales are so they can see sort of what they could potentially recover and hopefully use that to adjust their expectations. But what they would end up taking is they understand this is about avoiding defense costs, and they may have other cases against much bigger companies, but they send out enough of these sort of demands to fund their practice while they're engaging in the longer litigation against big companies that fight back.

22:01
Daniel Scharf
Okay, got it. It sounds like they may initially give you some very ridiculous number, like maybe you gave them some information, and they'll say, okay, great, give us the full value of your company, and that'll be it for this grave injustice of the person who found a problem. And then you might go back and give them a really low number in response. It sounds like just, I think, to kind of like when someone anchors you high, I think our business school negotiations professors would say, immediately, then counter very low. Right. So they could come in and say, great, we want hundreds of thousands of dollars. And you might go back and say, what could you respond with at that point?

22:47
Lauren Handel
I mean, really anything. It's all about gauging whether or not you're going to be so offensive that they just end the conversation. And it really does depend on who you're dealing with. So it is possible that the plaintiff's side is what I call a true believer. So there are plaintiffs firms out there that are doing this not just to go after as many people as they can to make as much money, but because they actually have a cause that they are trying to advance, and it will be much harder to settle with them. But assuming this is more of the sort of mass find, as many of these kinds of cases as we can, that are about relatively minor issues, you could start the negotiation with $500, $1,000, $2,000.

23:35
Daniel Scharf
Okay, got it. So probably over a couple of rounds of negotiations that will feel horrifying for a brand, you might settle in that range of what they were kind of looking for initially, and they will be maybe very unhappy with it. You'll be unhappy with it, and everyone will walk away unhappy, but somebody will get some money out of it. In a plaintiff in that case, what percent of the settlement would they actually be receiving? I know it's going to depend on lawyer hours, but it could end up being a pretty small percentage. Right? Like 510, 20%, something like that.

24:12
Lauren Handel
Yeah. They're definitely not getting most of it. It's an important thing to point out, too, that what we're talking about this sort of, if this is a class action or it's a putative class action, and you're talking about this early settlement before the lawsuit is filed, you're talking about settling only with that individual plaintiff, and there are risks to that. So you are not going to get a settlement. That means you can't get sued for this again, which you could get, if you could litigate enough to get a settlement approved on a class wide basis. That has to be approved by the court. And so it's expensive to do that. So it'll only be in a case where financially it makes sense to do an individual settlement and that plaintiff.

25:01
Lauren Handel
So sometimes when these are done, the brand won't know what the allocation is to the named plaintiff. But I've seen where they maybe get, let's say there's a settlement for $10,000 and the name plaintiff maybe gets $1,000 of that.

25:24
Daniel Scharf
Got it. What you just said is that if you just settle this presuit thing that you've gotten a letter for and end up paying them $10,000, somebody else just can pop out of the blue, another law firm send you the same letter and you have absolutely no different, nothing defensible. Like, oh, we already paid this other guy, though. No, they're like, great, then you pay us that also. Right. Whereas if you actually fight the thing and win, then that would give you the defense. Or if you're expecting a ton of these, then maybe you actually do want, if they're going to come at the same time, you might even need that kind of a class action structure to be able to kind of fight all of them once and for all. Maybe.

26:17
Lauren Handel
Yeah. So it's possible even where you've decided you're trying to settle this and you're basically then working with the plaintiff's lawyers if there's enough risk of other follow on lawsuits that you would want to settle on a class wide basis. But you can't just decide between the parties to do that because there's other people's interests who are involved. So the court has to approve it. So there's some amount of discovery and briefing that has to happen to show the court that the requirements for class certification are met. And it's a looser standard than if you were doing it for purposes of proceeding to trial. But the court still does have to scrutinize it. Excuse me for my voice. So if the dollar amount is high enough and the risk is high enough, it makes sense to do that, especially if it's already public.

27:12
Lauren Handel
If this is a case that started with a public issue or because the complaint was actually filed and there's the potential for other lawsuits in other jurisdictions because, yes, settling with the one plaintiff does not give you any defense against somebody else who happens to come up with the same idea suiting you in another place or even in the same place. Okay.

27:35
Daniel Scharf
Do you need water or something? Okay. So you got it?

27:37
Lauren Handel
I've got it, yeah. Thanks.

27:40
Daniel Scharf
Okay, so I know that if a suit can claim that they are affecting a change. Right. Like making you actually change something about your product or label to solve this issue, they can go after more money from a brand. Right. Whereas if it's something that maybe you actually already discovered on your own about your packaging and have kind of in progress to fix already in the market, does that impact the dollar amount or what are your thoughts on?

28:17
Lauren Handel
Yeah. So under California law specifically, there's a potential for recovery of attorneys fees on the plaintiff's side if they've won something. And so it can be that it can be having caused a change that was beneficial to consumers, but that's not necessarily the case under all states laws. So under other states laws, there can be a right to attorneys fees. It's always in the discretion of the court, but you don't necessarily have to show the same sort of change.

28:53
Daniel Scharf
Okay. But if you're in California and you do get sued by somebody, you should know that the plaintiff's attorney, that law firm that may have even been the ones who brought the case, if you've already fixed the thing that they're trying to get you to change, that may actually impact their ability to then include their fees in a suit if it actually goes to court, which probably is actually a big deal for them.

29:21
Lauren Handel
Yeah. I mean, it's almost always going to be in the brand's interest. Assuming the plaintiffs have identified an issue that is a real issue, that is something that is at least enough of an issue that there's a viable claim and therefore puts the brand at risk, it's almost always going to be in their interest to fix that issue as soon as possible.

29:46
Daniel Scharf
Got it.

29:47
Lauren Handel
Not only impact in this litigation, but also to prevent other litigation, for sure.

29:52
Daniel Scharf
Yes. And obviously, we would both advocate that brands really understand all of the regulatory guidelines around all of these different areas and really do their best to abide by them. Of course, sometimes there are things you might miss. You might not know something about one of your ingredients. So whether intentional or not, it can happen. So without further ado, let's jump into some of these. I would say, really, I don't want to call them hot areas, but I think I will because I can't think of a better word. So some of these hot areas in suits and litigation right now, things that are showing up on brand doorsteps a lot. So the first one that I think were going to cover is around false or deceptive labeling and advertising class actions.

30:42
Daniel Scharf
So can you tell us a little bit more about what are the most common ones that you see out there?

30:47
Lauren Handel
Yeah. So there's been several issues that kind of come up over and over again. And really, this type of litigation started and has remained a hot area with claims about products being natural. So you see less of that because it has been such a litigation target in the marketplace, people using that terminology less, but people are now using different variations of basically the same messaging, which is also getting them sued. So representing that a product that is not just something that was pulled right out of the earth and delivered in its natural form is natural, comes with risk. This type of litigation specifically has been focused on products that have highly processed ingredients. So it used to be products that had high fructose corn syrup might have said they were all natural. A lot of those got sued, so they don't do that anymore.

31:55
Lauren Handel
But maybe they're made with ingredients that are derived from genetic engineering, GMO ingredients. Those have been the subject of lawsuits. Or they have coloring in them, which, even if it comes from a natural source, is not natural, or the kind of latest version of this is. They may have things in them that they're not intentionally adding, like chemicals called pfas, which have been detected in almost everything. They're ubiquitous in the environment. And so trace contaminants that are not natural contaminants on a product that is representing itself as natural, even though the manufacturer may not or the brand owner may not be aware that they are there. Plaintiff lawyers are going out and testing products for things like this or pesticide, traces of pesticides and products. So those are all examples.

32:56
Lauren Handel
It remains an area that is very risky for a brand to position itself as all natural or nothing artificial. Different variations of that kind of claim.

33:07
Daniel Scharf
What are some of the common ones you'd see if people say nothing artificial or no artificial flavors, stuff like that?

33:14
Lauren Handel
Yeah. So that's another version of this, too. No artificial flavors, no artificial preservatives. There are a lot of lawsuits about products that have certain ingredients, like citric acid, malic acid, sorbic acid. These are ingredients that can be used for their effect on acidity regulation. They're not necessarily there to affect the flavor. But the plaintiff's lawyers have argued that they do have an impact on flavor. And therefore, if you're saying that the product has no artificial flavoring in it, that's not true. They do have an effect on shelf life. And so if you're saying that it has no artificial preservatives, that's not true.

34:04
Daniel Scharf
Okay, so what about representations that people do make about flavor and key ingredients? What are the stuff you're seeing in that area?

34:17
Lauren Handel
Yeah. So this is an area where there's been increasing success on the defense side with motions to dismiss, mostly because there is one plaintiff's lawyer who has been prolific in filing lawsuits on the issue of products that represent that they have a flavor and are getting that flavor not only from the named ingredient. So, for example, lemon flavor cookies. They may have some amount of lemon or a lemon oil in them, but they also have a natural flavoring in them that is supplementing that lemon taste. And there were tons of these lawsuits around vanilla flavored products, and it's been expanded beyond that to things like, fudge isn't really fudge because it doesn't have butter in it. Just tons of these lawsuits, more and more of them are getting dismissed, but not all of them are getting dismissed.

35:27
Lauren Handel
And so it is something to be very careful about, of considering whether you are making representations that a product has more of an ingredient that consumers will view as desirable than it really does. So that's one version of this. Then there's another, which is what I consider to be really sort of hyper technical, holding brands to the rules around flavor labeling. So there is a very difficult to understand regulation, FDA regulation, around how you describe the characterizing flavor of a food or beverage product and what language you need to use if you are using a flavoring ingredient to provide all or some of that flavoring. And there is a set of plaintiffs lawyers who are out there really just looking for violations of this rule and arguing that violation is deceptive. And under California law, it doesn't even necessarily have to be deceptive.

36:33
Lauren Handel
Under California law, there is a basis for suing just for FDA violations as a form of consumer protection, even though the federal food and drug law does not allow a private right of action.

36:50
Daniel Scharf
Got it. Okay. I remember reading about one kind of wacky lawsuit from back in the day that was against Red Bull. That was about somebody sued them saying that Red Bull did not actually give them wings.

37:05
Lauren Handel
It didn't give them wings.

37:06
Daniel Scharf
I know. I mean, come on. I thought. Yeah, we all. Of course, when it says Red Bull gives you wings, assume that you will sprout wings out of your back and go and perform miracles. But I don't know if it was only about that or if it also was kind of related to just the overall performance or energy or whatever that people thought you would get from it. But I believe that may be why now the wings has two eyes in it. So it's like, okay, literal wings. And now if you somehow sprout wings with two eyes, then I guess that's just a bonus, right?

37:40
Lauren Handel
Yeah. Well, so there is a concept of the reasonable consumer in this type of litigation. And for the most part, the courts will find that the claim is good enough that at least potentially a reasonable consumer could be deceived. But occasionally, it's just so ridiculous that the court will find early on in the litigation that as a matter of law, no reasonable consumer could be deceived. There was a case like this about fruit loops. Where could anyone actually think they contain fruit?

38:18
Daniel Scharf
I might buy that one. Like fruit loops? Like, yeah, maybe there should be at least some fruit. I don't think it's just a loop of fruit, but, yeah. Okay, well, that's good to know. What about some of the health claims that you see? Because the whole world is moving towards functional and ingredients and lion's mane and all of these other things and people looking for food to give them. Food is medicine and health benefits. Where are the claims that you see around that?

38:54
Lauren Handel
Yeah, so the functional claims, you don't see as many lawsuits around functional claims. There is definitely the potential for that, and there are some, and they might focus more on products like weight loss products. But there's a case right now that's working its way through the courts about boost, a nutritional beverage that's positioned for people with diabetes. And the 9th Circuit Court of Appeals has held that case can move forward. And the allegation there is, does the plaintiffs say they expected the product to actually improve their blood sugar levels? And Nestle says, we don't say that. We just say it helps you to manage your blood sugar because you don't have spikes in blood sugar. So there's room for disagreement.

39:54
Lauren Handel
My takeaway from it is the plaintiffs did a good enough job with their complaint that case can move forward and it's being really aggressively fought. But so here and there you'll see things about actual representations about functional benefits where the plaintiff's lawyers maybe know enough about the science to say there's no way you can substantiate that. And so they'll go after those. But more, what you see is these non specific, kind of good for you representations getting challenged. And there's a lot of that right in the marketplace. There's a ton of marketing that products are better in some way from a health perspective than whatever the traditional product is that they're offering themselves as an alternative to.

40:47
Lauren Handel
And yet, if they have a lot of sugar, or even a lot is kind of a vague term, but a relatively high amount of added sugar and are being positioned as good for you in some way, that has been a hot area of litigation. And what's interesting about this kind of case is it may not even be one claim that's at issue. It's really the overall positioning of the product. So the plaintiff's lawyers will point to not just one claim, but if you look at the label, it might have nutrient content claims that say that it has high protein or it points out certain good ingredients that it has, or it has whole grains, and use language like nutritious. And kind of, when you put it all together, the net takeaway of that is this is good for you.

41:42
Lauren Handel
And yet if you look in the nutrition facts panel and find that it has a significant amount of added sugar, that is a risky way to position that product.

41:51
Daniel Scharf
Okay, got it. What about sustainability and environmental type claims?

41:58
Lauren Handel
And there's more and more of this kind of claim. Right. So it's obviously an issue that is emerging in consumers minds as people are becoming more focused on the environment. And understandably something that a brand would want to be able to say about itself. If it's actually trying to do something better in the way that it sources its ingredients or in its supply chain, in the way it manufactures, in its packaging, you have to be careful because language like sustainable is so broad. The Federal Trade Commission has its green guides about different kinds of environmental claims that's in the process of being updated, and we'll hopefully provide some good guidance to brand owners and marketers.

42:49
Lauren Handel
But the warning in there now is a claim like sustainable or sort of these broad environmental benefit claims can have so many different interpretations by consumers that it's impossible to know how to substantiate all of those, or it would be impossible to substantiate all of those, and therefore, it's risky. So what you can do and should do is say exactly what you mean and what you can support. So qualify those kinds of claims. If your product is sustainable because of the agricultural methods that are used, help to conserve water, and you can back that up, we'll narrow your claim to that, or at least put it in context where consumers will understand you're not making a representation about your entire supply and distribution chain of your product. So that's the kind of consideration that you need to give to that.

43:45
Lauren Handel
And another version of it is environmental animal welfare claims. So for products that use animal derived ingredients, it's important to be really careful about what you say about how the animals are treated, because, again, there can be really different understandings. These aren't terms that are defined in regulations like humane, even terms like free range and pasture raised. And there are different industry standards, there are certification standards, and there are people who may disagree with those standards. And so even brands that have certifications have been sued on the basis that the certification isn't as strong as the brand is representing it to be. The animals aren't treated as well. It is not as sustainable or humane as they are representing.

44:44
Daniel Scharf
Got it? Okay. And then what about slack? Fill that space in the chip bag. That is not actually chips. That's just a lot of air. What do you see there?

44:57
Lauren Handel
Right. So this is always somewhat of a risk. There are defenses. So the air in the chips, if it's there for a purpose, which is to keep all the chips from crumbling, then that's a defense to that. Where brands can get in trouble is, especially when they change their packaging and reduce the contents. And even though they update what it says, the net contents, if you haven't changed the package size, especially that, is the potential to cause consumer confusion and deception. They may not look that closely at it. They're used to buying a product. It now has less than it used to have. And so that would be a risky move. But slack filled the idea, basically that consumers are getting less of the product than they may expect. And that can because of the size of the packaging compared to its contents.

45:55
Lauren Handel
It's why you'll see fill levels marked more and more on packages where the contents can settle, so that if you can't see through the packaging, you can see the line that you should expect the pasta to be at when you open the box, that kind of thing. But it's especially risky when you make a change to the contents.

46:15
Daniel Scharf
And if you do have a defense like that, whether it's one of these claims or the reason that you need the slack in the product, I've heard some lawyers recommend, put the research that you have in some kind of a dossier, like a live Google Doc, so you can keep all of your research there and the reasoning and rationale where if you do get challenged on something, then you'll have it there and people can see that you've had that research ongoing, that your team was diligent about it. What do you think about that?

46:42
Lauren Handel
Yeah, I think it's a good idea. In general, if there's something that you expect to be called out on, first of all, substantiate, you should always have substantiation for claims you're making. But if there's things that potentially that are litigation risks, there is that opportunity in those initial conversations and trying to settle a case early or to dispense of it, that if you have a really strong defense and you have it at your fingertips ready to go to say, no, you're wrong, then that would be great to be able to share that with the plaintiff's lawyers and show them that it's not a case worth pursuing.

47:26
Daniel Scharf
Got it. Okay, so you mentioned, like, PFAS. You mentioned PFAS before. Anything more in kind of that area like heavy metals, especially Prop 65, that you think brands should know about.

47:41
Lauren Handel
Right? We've been talking mostly about consumer protection cases that are brought under deceptive trade practices acts, where the allegation is that the labeling is false or misleading. Prop 65 is its own separate law in California and is a huge litigation risk for anyone who sells a product in California that might have a chemical on the Prop 65 list. It's its own cause of action. It incentivizes lawyers to bring these kinds of cases because it has what's called a bounty hunter provision. And the biggest areas are products that come from natural ingredients that could have elevated levels of heavy metals. So, like spices are a really big target because they will naturally, as the plants are growing, take up lead or chocolate. Lead and cadmium. Arsenic is another one.

48:48
Lauren Handel
And these are chemicals that can occur naturally in the environment, but the level at which a warning is required is very low, especially for lead. And so if the brand didn't provide a warning on the product, they can get sued, or if they are too small, which a lot of brands think that I don't need to worry about Prop 65 because I have fewer than ten employees. And I've heard that there's an exemption. That is true. But if you do business with a larger retailer or distributors in California, that retailer can then get sued because the product didn't have a warning.

49:29
Lauren Handel
And all of the big retailers, if you look closely at the terms that you sign when you onboard with them, they require that you are warranting that your product is complying with Prop 65 and that you are indemnifying them if they get sued because you failed to give a warning.

49:48
Daniel Scharf
Yeah, that's a scary reminder that sometimes these suits can go after one of your retailers as well. Like, I remember seeing the suit filed or in the news anyways against feel free, which has kratom in it. I don't know if I'm saying that right. But then they got sued as well as 711 for selling it without, I think, giving adequate information about the ingredient. And for anybody who wants to learn more about Prop 65, there is so much info to go through. We actually did a great webinar on that separately with Rohit Sapna from Keller Heckman. And that's available on our Vimeo page, which is vimeo.com startupcpg. Look way back in the archives and it's there. And he gave a really good overview for anyone who lives here in California.

50:45
Daniel Scharf
You're pretty familiar with at least seeing the words Prop 65, because anytime you walk into a building or look at almost anything, there's a Prop 65 warning there that says potential cancerous materials are here. Just always kind of be aware of everything. But people outside of California won't be as familiar with that. But if you sell a product that is sold in California, that will apply to you. So really good to understand. And if you have any potential ingredients that could violate Prop 65 and get you in trouble, good to check out that webinar. It was a doozy. Okay. So I thought the next one I would love touch on is the Americans with Disabilities act. And that is one that brands have been getting in hot water for a little bit more lately. What are you seeing there?

51:35
Lauren Handel
Yeah, so I've had a couple clients deal with this. There are a few firms, mostly in California and New York, although I've heard that it's starting to pop up in some other states as well, that have kind of pioneered this type of litigation based on some court decisions. And there are mixed decisions around the country. But there are some that find that a website, at least if it's an ecommerce website, are places of public accommodation subject to civil rights laws. So there's the federal Americans with Disabilities act. There are also state counterparts under California law. New York has its own state statute. New York City has its own law.

52:25
Lauren Handel
And so these claims are being filed on behalf of visually impaired consumers who allege that they tried to purchase a product through a website and were unsuccessful or had challenges in doing so because their screen reader device that they use was unable to successfully navigate the website based on its coding. And there are so many of these being. So the two that I've dealt with were both in New York. I'm a New York lawyer, and it's, again, it's the same sort of thing. One of the ones I dealt with was a class action. The other one was just brought up on behalf of the individual plaintiff. The state law authorizes attorneys fees for the plaintiff if they were to prevail and has statutory award damages.

53:23
Lauren Handel
So the actual damage amount at issue is only $500, but potentially the attorney fee recovery could be much higher. So that's where the value is for them. But they're filing dozens and dozens of these all the time. And so it's definitely something to watch out for. As more brands have their own Shopify pages and are doing more direct to consumer through their own websites, I think that's contributing to it. And also it's been court rulings that are contributing to this and finding that a website is a place of public accommodation and therefore this law applies, whereas historically we've only seen it as applicable to brick and mortar settings, makes sense.

54:10
Daniel Scharf
And I think one of the challenges there is, I know brands who are talking about it like, yeah, we want to make sure that we are AdA compliant, but we're actually not completely sure how we think we've followed them, but it's not always so clear. And we did the stuff on our website, but it could change. From the research that I've done and from talking to brands, it seemed like people were settling on. I mean, you can ask somebody to do a check for you, but if you update your website, that could change. And then there is kind of an always on compliance service that you can subscribe to that will kind of keep checking your website.

54:43
Daniel Scharf
One thing that I liked, I saw some brands just putting at the bottom, like, by the way, if you have any troubles with this website whatsoever, please call this phone number and we will help you. Is that something that can be effective?

54:57
Lauren Handel
I think it certainly helps. Right. So at least gives you the argument, especially to have an alternate way for somebody to order, which means probably needing to have a phone number that is staffed because it needs to be comparable to ordering through the website at least gives you a defense. If that's all you can do, then have that have some other way for people to contact you that is visible in the place where you would order and not like buried in some link at the bottom of your website that can help.

55:34
Lauren Handel
There are these services and I can't vouch for any of them and I am by no means a tech expert or a website developer, but service like accessibility, they claim that this add on to your website makes it compliant, makes it function at the same level as if you changed all the underlying coding. And there are website it's the website content accessibility guidelines that are the industry standard. Ideally, everyone could afford to hire a web developer that was really familiar with those guidelines and do the underlying coding, but I've heard that's very expensive, so I don't know how practical that is. And it is also a defense that something is prohibitively expensive to comply or it would make the website not function in the same way. Again, this isn't really about defenses for smaller brands. That's not what we're really talking about.

56:38
Lauren Handel
This is again about how much are you going to settle this for but preventatively, I think it's a good idea to offer alternative ways for people to order. Look into those services, at least find out what it would cost to do the coding in a way that was compliant. But my understanding is that the plaintiff's lawyers are searching for these cases by testing out websites with screen readers and where they encounter problems. They then have the plaintiff go and try to order because they need to be able to allege the plaintiff tried to order the product. And so if the overlay type of solution does in fact make the site compatible with screen readers, then that should be protective.

57:26
Daniel Scharf
And what would happen if it was like maybe your site had a glitch one day and it was out of compliance or something, but in general it is, and they just happen to be shopping on that day. Could they still be asking you for a pretty significant damage in that kind of an instance, even if that's not the way it's actually supposed to happen?

57:45
Lauren Handel
Yeah. Again, it's not really about damages. The kids are seeking injunctive relief plus attorneys fees. Potentially. If it's a class action, they're seeking damages. If the state statute authorizes. So it's $500 under New York law. If it was a class action on behalf of all the consumers who were unable to purchase through the product, there would be a significant dollar amount. But basically these are about injunctive relief plus attorneys fees. So if you were able to show like, no, that's impossible, that there might have been an issue one day with our website, but our website is actually compliant. And the way to do that is with an audit. So there are services you can hire to do a manual audit.

58:32
Lauren Handel
That's what you would want to have is somebody who actually manually goes through your site rather than just having it screened by a computer to prove that it's compliant. That would go a long way towards at least reducing significantly the settlement demand.

58:49
Daniel Scharf
Okay, got it. Are there any other areas that I missed or that you think it's important for brands to be aware of at the early stage?

58:59
Lauren Handel
Yeah. So I would just say we've been talking about kind of the kinds of cases that are sort of an industry. For certain segments of the plaintiff's bar, there are always the actual disputes, right? There's contract disputes. There are potentially labeling or advertising type litigation by somebody who's actually caught you saying something that's not true. So it kind of never ceases to amaze me that people get really in love with their messaging and maybe fail to see, like, they know what it means to them, but they might fail to see other possible interpretations of what they're putting out in a way that an outsider, a lawyer or somebody else might look at it and say, but have you considered this message? And is that true? Because it happens all the time. People send me their labels to review and I'll point something out.

01:00:05
Lauren Handel
We don't mean that. And it doesn't matter what you intended. If it's a reasonable interpretation that a consumer could take away, you could get sued for it. Just in general, you need to be kind of stepping back, thinking about overall the message you're trying to put across to consumers. And is that a truthful message and one you can support?

01:00:33
Daniel Scharf
Okay. And you obviously have to be aware of what's on your label. Maybe that's going to be the thing you need to focus on first, but then also holistically, like what's on your website and what are the claims or the ways you talk about your product there and your email marketing and on your social media. How does all of this extend to, let's say, you're working with an influencer or some kind of an affiliate that probably, let's say, that's contracted by you in some way. And a lot of times they might be doing something that feels really organic to them, but they might say something in a way that, you know, like, you couldn't say that they obviously, as a non industry person who hasn't gone through the regulatory checks that you have, might not really know. They shouldn't say it exactly that way.

01:01:18
Daniel Scharf
What's the level of liability you could have in that kind of a scenario?

01:01:24
Lauren Handel
Well, you can't. First of all, what I tell people to do is have guidelines. Right? So this applies to your own marketing team. It applies to influencers that you work with. Anyone who's going to be out there promoting your product needs to know what are the safe grounds that we can talk about and what do we need to stay away from. And that should be informed by regulatory compliance. It should be informed by litigation risks and informed by what you can actually substantiate. Right. So those guidelines should be out there. When it comes to influencers or even consumers who are reviewing your product, where you get in the most trouble is if you've endorsed their message in some way. Right.

01:02:10
Lauren Handel
So if it's an influencer, you're very likely to be doing this because you are going to help in promoting what the influencer is putting out. If it's a consumer review, let's say they post a review on Amazon or on your website. If you are even liking a message that they post on your social media or you are republishing a review that they've put and it says something about your product that yourself cannot say, that is now your message and can get you in trouble.

01:02:40
Daniel Scharf
All right, so lots of good watch outs there. I'm sorry to everybody for all of the scary stuff that we are just previewing that can happen to your brand. But hopefully you guys will do all of the great checks ahead of time and not face some of these unpleasant suits and letters that you can get from people. So, Lauren, maybe just like, more a question for you as a human out there in the world, which is, I think we could all agree that there are a lot of suits that would have merit, that we're all grateful for. Somebody fighting for consumers rights, like a fast food chain serves you chicken. But it's not chicken, it's something else. Yeah, we don't want that.

01:03:17
Daniel Scharf
Hopefully someone's out there holding their toes to the fire and keeping them honest, whereas there are other things, let's say maybe that not actually growing wings from your back. Like, okay, maybe that's a little over the line. You as a consumer, let's say, where do you see the line? If you're thinking about the injustices that you want people to fight for you on.

01:03:44
Lauren Handel
So me personally, and again, we started this talking about what got me interested in CPG and food industry specifically, and that is that there actually are a lot of problems with our food system where companies are overreaching and positioning themselves in a way as being beneficial to the environment, treating animals well if they're really not doing any more than everyone else. But it's just kind of for marketing. Yeah, that personally bothers me. But what I don't like is when there are brands, and there are many of them, that actually are trying to do good and they are doing things differently, but maybe there's more that could have been done right or it's kind of the perfect is the enemy of the good.

01:04:51
Lauren Handel
So that also offends me that I think companies get punished when they are actually trying to do good, but maybe their language was just not as careful as it could be and then they'll fall to this type of lawsuit, too.

01:05:10
Daniel Scharf
Okay, got it. Thank you very much, Lauren. The advice that you're giving here, I think is really helpful. Probably there are a lot of brands out there that will hear this and realize there are some things that they need to fix up and hopefully avoid getting into some of these scenarios that can really be a nightmare. So thank you so much for sharing your years and years of legal experience with the community and also just for being so active on our startup CPG slack channel to connect with brands that way. So in general, Lauren, I assume it's okay if brands have a question about one of these areas or they have a potential issue. If they reach out to you, if they want to chat with you, what's the best way for them to do that?

01:05:51
Lauren Handel
Yeah, sure. So I am in the startup CPG Slack community, so you can message me there. My email is lauren@handelfoodlaw.com just send me an email. You can find me on LinkedIn, too.

01:06:05
Daniel Scharf
Perfect. All right. And probably you're willing to just kind of have initial consultations with brands or whatever just to hear what the issue is and just help them think about what the steps could be or what could be involved.

01:06:18
Lauren Handel
Absolutely. Yeah. Always happy to chat. See if we can help in some way. And if not, I will very honestly say that. So, yeah, feel free to reach out.

01:06:29
Daniel Scharf
All right, Lauren, thank you so much. It's been a pleasure to have you on the show. And thank you as always. And we will see all of you on the slack.

01:06:39
Lauren Handel
Thank you.