FAT
Is Fat the Next Tobacco?
For Big Food, the supersizing of America is becoming a big headache. FORTUNE
Tuesday, January 21, 2003
By Roger Parloff
On August 3, 2000, the parody newspaper The Onion ran a joke article under the headline Hershey's Ordered to Pay Obese Americans $135 Billion. The hypothesized class-action lawsuit said that Hershey "knowingly and willfully" marketed to children "rich, fatty candy bars containing chocolate and other ingredients of negligible nutritional value," while "spiking" them with "peanuts, crisped rice, and caramel to increase consumer appeal."
Some joke. Last summer New York City attorney Sam Hirsch filed a strikingly similar suit--against McDonald's--on behalf of a class of obese and overweight children. He alleged that the fast-food chain "negligently, recklessly, carelessly and/or intentionally" markets to children food products that are "high in fat, salt, sugar, and cholesterol" while failing to warn of those ingredients' links to "obesity, diabetes, coronary heart disease, high blood pressure, strokes, elevated cholesterol intake, related cancers," and other conditions.
News of the lawsuit drew hoots of derision. But food industry executives aren't laughing--or shouldn't be. No matter what happens with Hirsch's suit, he has tapped into something very big. (Editor's note: After this story went to press, a federal judge dismissed the suit, but granted permission to refile, which Hirsch says he will do.) Seasoned lawyers from both sides of past mass-tort disputes agree that the years ahead hold serious tobacco-like litigation challenges for the food industry--challenges that extend beyond fast foods to snack foods, soft drinks, packaged foods, and dietary supplements. "The precedents, the ammo, the missiles are already there and waiting in a silo marked 'tobacco,' " says Victor Schwartz, general counsel of the American Tort Reform Association.
Junk food may not be addictive in the same way that tobacco is. But weight, once gained, is notoriously hard to lose, and childhood weight patterns strongly predict adult ones. Rates of overweight among small children--to whom junk-food companies aggressively market their products--have doubled since 1980; rates among adolescents have tripled. (See the following story for more on the fat epidemic.) In 1999 physicians began reporting an alarming rise in children of obesity-linked type 2 diabetes. Once an obese youngster develops diabetes, he or she will never get rid of it. That's a lot more irreversible than a smoking addiction.
Though many people recoil at the idea of obesity suits--eating habits are a matter of personal responsibility, they protest--the tobacco precedents show that such qualms can be overcome. Yes, most people know that eating a Big Mac isn't the same as eating a spinach salad, but most people knew that smoking was bad for them too. And yes, diet is only one risk factor out of many that contribute to obesity, but smoking is just one risk factor for diseases for which the tobacco companies were forced to fork over reimbursement to Medicaid. (The industry's share of the blame was statistically estimated and then divvied up among companies by market share.) The tobacco companies eventually agreed to pay $246 billion to the states, and juries are now ordering them to pay individual smokers eight-digit verdicts too.
By the Surgeon General's estimate, public-health costs attributable to overweight and obesity now come to about $117 billion a year--fast approaching the $140 billion stemming from smoking. Suing Big Food offers allures to contingency-fee lawyers that rival those of Big Tobacco, and the implications of that are pretty easy to foresee. While the food industry is not apt to be socked with anything like the penalties that hit tobacco, companies will face consumer-protection suits that might cost them many tens of millions of dollars and force them to significantly change marketing practices.
The triggering event occurred in December 2001. That's when the Surgeon General, observing that about 300,000 deaths per year are now associated with overweight and obesity, warned that those conditions might soon cause as much preventable disease and death as smoking. The report prompted journalists to call John Banzhaf III, an antismoking activist and a law professor at George Washington University School of Law, to see whether tobacco-style litigation might be in the offing. "I said, 'Well, no, there are important differences,' " Banzhaf recalls. But even as he talked, he began to change his mind.
Another key academic strategist in the tobacco wars, Northeastern University law professor Richard Daynard, was soon drawn into the fray. At a conference last April to discuss Marion Nestle's new book, Food Politics, he was asked to talk about possible obesity-related litigation. (Nestle, who chairs the nutrition department at New York University and whose name is pronounced NESSel, is not related to the founders of the food company.) Daynard, like Banzhaf, at first saw no analogy to tobacco. But as he read Nestle's book, he, too, began to change his mind.
Here's Nestle's argument. For at least the past 50 years public-health authorities have wanted to deliver a simple, urgent message to the American people: Eat less. They have been thwarted from doing so, however, by political pressure from the food industry. The meat industry alone spends millions a year on lobbying, apparently with great success. Instead of forthrightly saying, "Eat less red meat," government health authorities are forced to say, "Eat more lean meat." Food companies compound the confusion by advertising that their products can be "part of a balanced and nutritional diet," even though they know that their products are not typically consumed that way. Any food can theoretically be part of a balanced diet if you keep the portions tiny enough and eat lots of fruits, vegetables, and grains.
As Daynard well knew, advertising claims that are literally true, but misleading when viewed in a real-world context, can violate state consumer-protection laws. In some states, like California, plaintiffs can force companies to disgorge all profits attributable to advertising that employs such statements, and the plaintiff can win without having to prove that even a single individual was actually tricked by the statement.
The idea of bringing such suits against the food industry is not unprecedented. In 1983, for instance, the California supreme court greenlighted a suit brought by an advocacy group against General Foods over the way such breakfast cereals as Sugar Crisp and Cocoa Pebbles--which contain 38% to 50% sugar by weight--were being marketed to children. The plaintiffs argued that "although promoted and labeled as 'cereals,'" the products "are in fact more accurately described as sugar products, or candies." The court suggested that ads even implicitly claiming that such products were nutritious or healthful were plausible lawsuit targets. (After the ruling, the case settled.)
Last July, Daynard attended an informal meeting of lawyers and public-health advocates in Banzhaf's office in Washington. "The first question at John's meeting was, 'Is there a there there?' " Daynard recalls. "What persuaded us was, in a sense, the media. This thing is so radioactive in terms of media attention that cases will bring in other lawyers and bring in other cases."
Later that month a lawyer who'd never heard of Banzhaf or Daynard crashed their party. Sam Hirsch, who runs his own small practice in New York City, had become interested in food issues after an overweight associate referred to a burger as a "fat bomb." Though Hirsch, 54, had never brought a class action, he now filed two, one in Brooklyn and another in the Bronx. The suits, brought on behalf of classes of obese people, named McDonald's, Burger King, KFC, and Wendy's as defendants.
The press loved the story. The industry response was ferocious. The Coalition for Consumer Freedom, a trade group of restaurants and food and beverage suppliers (McDonald's is not a member), promptly took out aggressive full-page ads in newsmagazines. One showed a man's bloated, bare gut spilling over a belted waistline. The copy read: "Did you hear the one about the fat guy suing the restaurants? It's no joke."
For plaintiffs lawyers and nutrition activists, the Hirsch suit was a mixed blessing. Some worried that it was such a laughingstock that it might strengthen the forces pushing for tort reform. As a tool of public education, on the other hand, the Hirsch suit was a landmark. Even if the industry was winning the talk-show shout-fests, its arguments about personal responsibility sent a double-edged message, according to Daynard. "'If you're stupid enough to use our products, you deserve to get the diseases our products cause.' That's what it means if you deconstruct it," he says. "This sort of discussion is not good for the lawsuit, but it's very good for public health."
In August, Banzhaf invited Hirsch to the second meeting of his group. Afterward Hirsch decided not to pursue his two lawsuits, which had been filed on behalf of adults, and to bring instead a new class-action suit on behalf of obese children. He focused this suit on McDonald's alone. One prospective class member, 400-pound, 15-year-old Gregory Rhymes, who suffers from type 2 diabetes, stated in an affidavit that he has eaten at McDonald's "nearly every day" since he was 6. Neal Barnard, a doctor who heads a vegetarian advocacy group, submitted a declaration asserting that "the consumption of McDonald's products has significantly contributed to the development of [Rhymes's] obesity and diabetes."
McDonald's has mounted a spirited defense. "Every reasonable person understands what is in products such as hamburgers and fries," McDonald's lawyers argue in their papers, "as well as the consequences to one's waistline, and potentially to one's health, of excessively eating those foods over a prolonged period." The lawyers also warn that the plaintiffs' theories, if accepted, would usher in "an uncontrollable avalanche of litigation against other restaurants and food providers, as well as other industries (such as the pizza, ice cream, cheese, and cookie industries)." In a statement to FORTUNE, McDonald's said that it has long made nutritional information available to customers upon request. "Nutrition professionals say that McDonald's food can be and is a part of a healthy diet based on the sound nutrition principles of balance, variety, and moderation," the statement continues. McDonald's has asked a federal court in Manhattan to take the case away from the state court and then to dismiss it. The court has not yet ruled.
Targeting kids is the food industry's Achilles' heel, says plaintiffs lawyer John Coale, a veteran of tobacco and gun litigation. Fast food, snack food, and soft drink companies focus their marketing on children and adolescents through Saturday morning TV commercials; through cuddly characters like Ronald McDonald (the second most recognized figure among children after Santa Claus); through contracts to advertise and serve soft drinks and fast food in schools; and through ever-changing toys included in Happy Meals.
If misleading advertising can be linked to childhood disease, Coale says, "you've got yourself not only a lawsuit but a movement." Food industry insiders have already come forward to speak to Coale about disturbing marketing practices, he claims. "We're not bringing down the fast-food industry next Tuesday," he says, "but there are legitimate legal issues here."
Hirsch's case, say many plaintiffs lawyers, is like the earliest tobacco and asbestos cases, which failed because the damning evidence had not yet come out. But once cases progress into the discovery stage, smoking-gun documents may begin to emerge, showing that the companies knew more than the general public about the impact that their products and advertising were having on children's health. Tort reform advocate Schwartz does not doubt this. "As discovery goes forward," Schwartz explains, "plaintiffs lawyers will be finding documents that, if held up in isolation, make it look like the industry had something to hide. That gives the case heft." Schwartz predicts that it will take about five years to reach that point.
Not everyone on the defense side is as fatalistic as Schwartz. Thomas Bezanson of New York's Chadbourne & Parke, who has defended tobacco, alcohol, and pharmaceutical companies, thinks that what happened to the tobacco industry was unique. "You had a very powerful attack made by the plaintiffs bar, the press, the politicians, and the state attorneys general," he says. "That only works if you are able to use all of those in a coordinated way to persuade society that the object of attack is some kind of pariah. I doubt that kind of attack can be lodged against food companies."
There is another important difference between tobacco and food. The tobacco industry "can't make a safe cigarette," says Banzhaf, "but fast-food companies can do almost everything we want without going broke. They can issue warnings, they can post fat and calorie content on menu boards, they can put more nutritious things on their menus. In fact, they already are." Last year, for instance, McDonald's reduced trans fatty acids in its fried foods and introduced low-fat yogurt and fruit roll-up desserts. A press release touts the yogurt as a "good source of calcium" and says that the fruit desserts provide 25% of the daily recommended value of vitamin C. "As a mom and registered dietician," a McDonald's staffer says in the release, "I know the importance of having this type of nutrient value in a snack food that kids enjoy."
Such gestures are themselves fraught with legal peril, however. Daynard mocks the McDonald's press release on its new healthy desserts, for instance: "We're talking about desserts to have after their Happy Meals!" protests Daynard. "The suggestion is that a really good mother would order four of them, right?"
If companies that produce high-calorie and high-fat foods are worried about future lawsuits, they aren't saying. PepsiCo, Cadbury Schweppes, and Kraft all declined to comment. Their trade group was less shy. "We advocate getting good messages to parents to help children develop good eating and exercise habits," says a spokesperson for the Grocery Manufacturers of America. "What we think is counterproductive is finger-pointing, reckless accusations, and lawsuits that won't make anyone any thinner." All the same, prudent food companies might do well to start scrutinizing their advertising and packaging, tweaking product lines, and, yes, squirreling away some reserves for potential judgments.
For at least one industry, though, the new spotlight on fat may be a glimmer of unaccustomed good news. Anecdotally, we've heard that smoking has helped a lot of people lose weight.
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