In the Courtroom: Lifeway Face Lactose Suit; Ex-Marley Coffee CEO Settles

LIFEWAY FACE LACTOSE LITIGATION

Kefir company Lifeway Foods is facing a class-action suit alleging that it deceived customers after several independent lab tests disputed the brand’s claims that its Plain Kefir is “99 percent lactose free.”

The complaint was filed by Andrew Block in U.S District Court for the Northern District of Illinois on behalf of all purchasers of Lifeway’s Plain Low Fat Kefir. It asserts that the product contains “about as much lactose as that commonly found in 2 percent milk.”

Attorneys for the plaintiffs said multiple tests of Lifeway’s Plain Kefir reported the product’s lactose content to be closer to 4 percent, citing a test performed by consumer watchdog group ConsumerLab.com as well as a study at the Ohio State University funded by Lifeway.

The complaint also notes previous litigation against Lifeway related to marketing and labeling claims, stating “it is clear that Lifeway has a history of problems with advertising and the accuracy of its labels.”

The plaintiffs are demanding a jury trial and is seeking for the judge to enjoin Lifeway from engaging in further conduct and to pay actual, statutory and punitive damages, attorneys’ fees and any further relief deemed to be just and proper.

MARLEY COFFEE SETTLEMENT REACHED

Shane G. Whittle, the co-founder of Marley Coffee Co., has reached a voluntary settlement with the U.S. Securities and Exchange Commission over allegations of his participation in a $78 million “pump-and-dump” scheme involving the stock of Jammin’ Java Corp. in 2011.

As part of the agreement, Whittle did not admit to any wrongdoing while accepting a 10-year ban in U.S. penny stock offerings and on being a director or officer in a U.S.-based publicly traded company. He also agreed to pay a $250,000 fine and a repayment of over $1.8 million, with interest, representing funds received by Jammin’ Java, a company that operates as Marley Coffee and uses the trademarks of late reggae legend Bob Marley on its products.

“I am delighted to bring closure to this challenging chapter,” said Whittle in a press release. He added: “Among the lessons I learned was that when building something on passion and big vision, entrepreneurs must properly vet professionals and work with a skilled management team to ensure that all laws and regulations are vigorously complied with.”

The agreement concludes the legal saga of Whittle, a stock promoter who befriended Marley’s son Rohan in Los Angeles and, upon learning of his purchase of a small coffee farm in Jamaica, proposed starting a coffee distribution business built on the Marley name, according to the SEC complaint filed in the U.S. District Court for the Central District of California.

To raise capital, Whittle completed a reverse merger with publicly traded shell company Global Electronic Recovery Corp. which allowed him to secretly gain control of millions of shares of company stock.

In an effort to drive up the stock price, Whittle allegedly conspired with partners to orchestrate a fraudulent financing agreement designed to create the appearance of third-party interest in the company, concealing his participation by making misstatements and omissions in ownership reports filed with the SEC.

With the stock value inflated, Whittle then coordinated a dump of 45 million shares on the public market without registering the transactions, making at least $78 million in illicit profits, according to the SEC.

NINTH CIRCUIT HEARS APPEAL ON BILLBOARD WARNINGS

A lawyer representing the American Beverage Association (ABA) argued to a panel of judges from the Ninth U.S. Circuit Court of Appeals in San Francisco on Monday that the city’s attempt to require health warnings on billboard ads for sugary drinks was “unfair” and “misleading.”

Richard Bress, arguing on behalf of the ABA, said that requiring such warnings would shift the focus exclusively on sugar-sweetened beverages, therefore implying that drinks with natural sugars and other high-calorie foods were not as dangerous.

He also said that for most Californians and San Franciscans, the warning was “false” because sugary drinks are only a health risk for individuals who consume more calories than they burn.

In response, San Francisco Deputy City Attorney Christine Van Aken said the warnings were both accurate and appropriate, noting that “there is widespread agreement that [sugary beverages] are the leading cause of the obesity epidemic.”

The provision requiring billboard ads for sugar-sweetened drinks to devote 20 percent of space to a health warning label was due to take effect last July, after a district judge rejected claims from the beverage industry that it would violate freedom of expression.

Federal courts have delayed enforcement while the ruling is under appeal.