Archive
Kosher and Halal Certification Fraud: An Emerging Litigation Risk
At least three empirical examples demonstrate the real-world class action litigation risks for companies that allegedly improperly represent their products’ Kosher/Halal certifications. The manufacturer of Hebrew National allegedly falsely represented the Kosher status of its deli meats. Chipotle allegedly did not disclose the pork in its pinto beans. Nature Made supplements allegedly failed to identify the presence of pork or other animal products.
Food companies face huge risks from this litigation due to the enormous size of the potential plaintiffs’ classes. In the U.S., Halal-certified foods are a $20 billion market. Kosher consumers buy $12.5 billion in food annually, and the broader market for Kosher ingredients exceeds $300 billion. (Many non-Kosher consumers choose to buy Kosher foods due to their perceived higher quality, and Kosher is the “hottest word on food labels.”)
In addition to civil liability, fraudfeasors also face risks of criminal prosecution and conviction in the court of public opinion.
To manage some of these risks in the CPG market, some researchers are exploring the use of RFID technology to trace Halal-certified foods throughout the supply chain. Food companies in related market segments should consider developing plans to manage their risks of this emerging and costly litigation.
You may be Sued Even if You Sell Safe Food
Your food processing company or restaurant may be sued even if it sold perfectly safe food, and even if your customers incurred no physical injury. Recently, a New Jersey state appellate court ruled that Hindu restaurant patrons could sue a restaurant for serving them a dish containing meat, after they expressly told the staff they were strict vegetarians.
The customers claim they incurred spiritual and emotional injuries. They seek damages to recover the cost of traveling to India to cleanse their souls.
The purpose of this posting is not to question anyone’s religious beliefs or comment on any factual support for the plaintiffs’ allegations or the restaurant’s possible defenses.
Rather, this litigation should serve as a reminder that “labels matter.” As discussed in Kwikset v. Sup. Ct. (Benson) 51 Cal.4th 310, 330 (2011), companies that incorrectly represent that their product is, for example, Kosher, when it is not, may not cause any physical harm to a customer who follows Kosher dietary laws. However, a customer that pays for food that a company misrepresents is Kosher likely has standing to sue the company for an economic injury based on that misrepresentation (at least in California). It appears that the New Jersey courts are following similar reasoning in this recent case.
The takeaway message: your customers take your representations seriously, and misrepresentations can be very costly. Just ask McDonald’s. In 2009, it paid $10 million to resolve claims arising out of allegedly mislabeling its french fries as vegetarian, even though no plaintiff incurred any physical injury (although the company represented that “vegetarians can enjoy” its french fries, they contained beef flavoring; nonetheless, McDonald’s denied plaintiffs’ allegations).
Are your Health and Nutrient Content Claims Accurate and Well-Documented? Labels Matter.
Please see my new article in Food and Beverage Packaging regarding exaggerated labeling claims and potential liability for false advertising and unfair competition.
“Gluten Free” Update: Baker Behind Bars
Paul Seelig, the owner of Great Specialty Products, has been sentenced to 9-11 years in prison for falsely representing to his customers that his bread was gluten free. According to testimony from one of his former employees, Mr. Seelig also told customers that his products were “homemade,” even though he apparently just repackaged baked goods he bought at various stores.
The takeaway message (other than the obvious: follow the law) is that customers rely on a company’s representations, so it is important for those representations to be correct, documented, and verifiable. Even if Seelig had truthfully represented that he tested his products weekly, he failed to produce any records confirming this at trial. ”Get it in writing” is as true now as it ever was; do you think your customers expect (and pay for) any less?
