San Francisco counsel Amit Rana loves the challenges inherent in protecting businesses and entrepreneurs who sell consumer packaged goods, especially in the tough regulatory environment of California. Over the last decade, increased attention from the plaintiff’s bar, coupled with regulatory restraints, has steadily increased legal risk to clients selling consumer goods such as food/beverage, dietary supplements, and cosmetics, and to clients in the burgeoning retail cannabis industry. In this recent Q&A, Amit discussed the complex legal and regulatory challenges that players in the industry face, and the trends he’s seeing in the space.
Q: What type of clients do you typically work with?
Amit: I work with CPG clients, which stands for "consumer packaged goods." CPG covers most non-durable packaged goods, like food, beverages, dietary supplements, or cosmetics. I work with alcohol brands as well, which comes with its own regulatory labyrinth. The cannabis industry fits squarely within the CPG world too, and I’m doing more work in that space as well. There is a complex federal and state regulatory environment that overlays everything that happens in the CPG industry, and there's a consumer deception aspect to it, where we encounter consumer class actions. My practice has always been centered at the intersection of false advertising, consumer class action law, and regulatory law. These three parts to the practice all tie together in the defense against consumer class actions, but also inform other aspects of my work with CPG clients, such as regulatory advice or competitor suits, such as Lanham Act cases.
Q: How did you first get involved in consumer class actions? What interested you most about that practice area?
Amit: I love my practice. It's a very dynamic area of the law that is constantly evolving, both substantially and procedurally. For example, you could (and many do) write pages and pages on how to interpret Rule 23 of the Federal Rules of Civil Procedure. But how that overlays with the ever-changing regulatory regime and the substantive state consumer protection laws adds complexity that I really enjoy. It’s intellectually challenging, and that makes it fun. The other thing I love about this type of litigation is that it requires a keenly strategic approach. Virtually all of the CPG consumer class actions are lawyer driven, with solicited plaintiffs and manufactured claims. Courts have traditionally decided legitimate disputes, and so to go from analyzing weighty constitutional questions to adjudicating a claim from a plaintiff who was shocked that the candy he bought wasn’t a health food (Yes, I’ve actually had to litigate that case!) isn’t something they are accustomed to. There is a unique challenge to defending against those claims, and our clients are best served by laying bare the contrived nature of these cases to the court.
Q: Is there anything unique to practicing in this area in California?
Amit: The relevance of being in California is that we have very strict consumer protection laws. It’s just a tough environment for regulated businesses to operate in generally, and both federal and state courts in California are quite liberal in reaching consumer-friendly interpretations of the law. That may be good from a policy perspective, but it creates a lot of unintended consequences when coupled with enterprising plaintiff’s lawyers who rove supermarket aisles looking for targets for their next lawsuit. The Northern District of California in particular has earned a reputation as the “Food Court” for the number of these class actions filed in that district.
Q: What are some of the unique legal challenges related to CPG, and what industries are particularly susceptible?
Amit: Again, it’s a highly regulated space with evolving and sometimes inconsistent guidance from regulators. That creates an extremely difficult environment in which the industry must operate. For example, the FTC recently released guidance setting very stringent standards on how a business must substantiate health claims, then subsequently issued 700 notices of penalty offense letters to manufacturers making health claims. And, as we know, the greater the regulatory burden, the greater the class action risk. So, I’m convinced that we will continue to see significant class action risk for any CPG clients making health or similar claims that are subject to regulatory scrutiny.
Q: How do you see that impacting the cannabis industry?
Amit: There's a cohort of repeat players that target the CPG industry with consumer class actions, and I think we're going to see that bleed more and more into cannabis. Cannabis is a fascinating industry because of the complex regulatory web in which it must operate. Similarly, when working with the alcohol industry, we have to grapple with tiered distribution and accompanying regulations. I think that's an example of the challenges we're going to see with cannabis too. How can a vertically integrated company operate such that they're satisfying the regulatory requirements for manufacturing, packaging, and retail? That's a challenge that very few industries have to face and increases risk of consumer class actions. There are also a lot of very technical aspects to manufacturing and selling cannabis. Those factual claims I think are going to be viewed as a ripe target for the plaintiff’s bar.
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Learn more about Amit Rana's Consumer Goods Practice and our San Francisco office.