In the Courtroom: Big Soda Wards Off SF Warning Labels; ‘Fiji Water Girl’ Sues

Warning Labels for Sugary Drinks Declared Unconstitutional in SF

Big Soda won a victory last week in its ongoing battle with San Francisco city officials to block a measure that requires advertisements for sugar-sweetened beverages to carry health warnings.

In an unanimous decision, a panel of 11 judges on the Ninth U.S. Circuit Court of Appeals ruled on Thursday that a 2015 health ordinance requiring sugary drinks carry warning labels violates beverage makers’ First Amendment rights. The decision upholds a September 2017 ruling by a three-judge panel on the Ninth Circuit, which found that the ordinance was “deceptive” and “unduly burdens and chills protected commercial speech.”

The ordinance requires the notice to take up 20 percent of any advertisements for non-alcoholic beverages that have added sweeteners and in excess of 25 calories per 12 oz. serving. It requires ads for such products to carry the following statement: “WARNING: Drinking beverages with added sugar(s) contributes to obesity, diabetes, and tooth decay. This is a message from the City and County of San Francisco.”

Writing the court’s opinion, Judge Susan P. Graber argued that the San Francisco Board of Supervisors failed to present evidence to justify a label that takes up 20 percent of product packaging, suggesting a smaller label would satisfy First Amendment protections. The ruling did not consider the merits of the policy itself.

The ruling also noted that a District Court “abused its discretion” in denying the motion for a preliminary injunction in 2016, pending appellate review

Plaintiffs in the case included trade group the American Beverage Association (ABA), as well as the California Retailers Association and the California State Outdoor Advertising Association.

In a statement shared with BevNET, the ABA said “We are pleased with this ruling, which affirms there are more appropriate ways to help people manage their overall sugar consumption than through mandatory and misleading messages.” The group noted its ongoing work with public health officials across the country and that nearly half of the beverages sold today contain zero calories.

“We want people to make informed decisions about their diets, and we are working with community leaders and public health groups to get that message out,” the statement read. “We welcome the City of San Francisco to work with us constructively to advance this common goal.”

Signed into law by Mayor Ed Lee in 2015, the San Francisco ordinance represents a first-of-its-kind attempt to use cigarette-inspired mandatory health warning labels as a means to curtail consumption of sugary drinks in the name of public health. State Sen. Scott Weiner, who originally sponsored the ordinance while a member of the San Francisco Board of Supervisors, called the issue a “looming health crisis for our health-care system and for insurance rates” at the time.

However, since then the ordinance has been mired in legal challenges. Following the court’s denial of an injunction in 2016, it was subsequently declared unconstitutional by the Ninth Circuit in 2017.

In response to last week’s decision, Sen. Weiner wrote on Twitter that the Ninth Circuit’s ruling was based on “the flawed theory that corporations have broad free speech rights as if they were people.” He urged the Board of Supervisors to consider a revised law with a smaller warning label that could win approval.

“These drinks aren’t safe & as with cigarettes, we have an obligation to warn people of their health risks,” he wrote. “This fight isn’t over.”

Using warning labels is a relatively new strategy for decreasing consumption of sugary drinks, though its viability as long-term public health policy remains in question. In a recent article in Forbes, Bruce Y. Lee, associate professor of international health at the Johns Hopkins School of Public Health, noted that computational simulation models of how warning labels on sugary drinks would potentially work in three cities (Baltimore, Philadelphia and San Francisco) showed a correlation between the presence of such labels and a decline in obesity prevalence rates.

A 2012 study published in the American Journal of Public Health also showed that providing consumers with caloric information significant reduced their odds of purchasing sugar-sweetened beverages.

Fiji Water Model Goes From Red Carpet to Courtroom

Last month at the 2019 Golden Globe Awards, Fiji Water captured the kind of viral attention and interest for free that major beverage brands regularly spend millions to obtain. Now, the bill may be coming due.

As first reported by E! News, model Kelly Cuthbert (real name Kelly Steinbach) — better known as Fiji Water Girl — is suing the premium water brand’s parent company The Wonderful Company for using her image to spearhead a global marketing campaign following her appearance at the Awards on Jan. 6 as a Fiji ambassador.

Cuthbert was anointed “Fiji Water Girl” after turning heads after she appeared holding a tray of Fiji bottles in the background of numerous pictures of celebrities posing on the red carpet as they entered the The Beverly Hilton hotel.

On Jan. 11, The Wonderful Company announced it was “bringing viral sensation, FIJI Water Girl, to retail with life-size standees nationwide.” In introducing the promotion, the company said news of Cuthbert’s appearance as FIJI Water Girl “garnered more than 1.6 billion impressions including appearances on The Late Late Show with James Corden, Good Morning America and People, among others.”

“For more than a decade, FIJI Water has shared the red carpet with some of Hollywood’s biggest stars,” said Clarence Chia, vice president of marketing and e-commerce at FIJI Water, in a statement. “Now FIJI Water is sharing the red carpet experience in store with retailers and consumers nationwide.”

However, according to court documents reviewed by the site, Cuthbert never authorized FIJI to use her image in marketing efforts. Steinbach also claims that Fiji attempted to coerce her into signing a false contract as a brand ambassador, then made a video recording of her doing so.

According to the complaint, “The fake document Steinbach fake signed in the potential future promotional video was not an agreement. The fake document was not signed by Fiji Water and was later destroyed by Steinbach.”

Lawyers for Steinbach are seeking monetary damages and for the use of her image on cardboard cutouts to be discontinued.

According to a story in the Hollywood Reporter, Steinbach’s lawyers estimate that in her role as “Fiji Water Girl” she has generated at least $12 million in exposure for the brand while simultaneously injuring “her peace, happiness, feelings, goodwill, professional standing and future publicity value.”

In response to the suit, Fiji issued a statement calling it “frivolous and entirely without merit.”

“After the Golden Globes social media moment, we negotiated a generous agreement with Ms. Cuthbert that she blatantly violated,” the brand said. “We are confident that we will prevail in Court. Throughout our history, we have had a sterling reputation working with talent.”

UNFI Sues Former Advisors Goldman Sachs

United Natural Foods Inc. (UNFI), the country’s largest publicly traded grocery distributor, is claiming in a lawsuit that investment bank Goldman Sachs extracted “millions in unjustifiable interest, fees and other damages” after serving as an advisor for its $2.9 billion acquisition of Supervalu Inc. last July.

On Jan. 30, UNFI filed suit in New York State Supreme Court seeking damages and recoupment of what the distributor is calling “ill-gotten gains” related to the transaction, in which Goldman was contracted to provide “a full range of transaction advisory services” and for the arrangement of a multi-billion-dollar loan.

“While positioning itself as UNFI’s trusted advisor on the one hand and its counter-party lender on the other, Goldman Sachs consolidated its command over all aspects of the transaction in order to extract millions in unjustifiable interest, fees, and other damages suffered by the Company and its shareholders,” UNFI said in a press release.

Along with the bank itself, the suit also lists as defendants the Goldman Sachs principal executive overseeing the Supervalu deal, as well as Bank of America and Merrill Lynch, Pierce, Fenner & Smith Incorporated. The distributor also filed similar claims separately against U.S. Bank for colluding with Goldman Sachs in the transaction.

In one count, UNFI contends that the Defendants are in breach of contract after “egregiously misappropriating” $40.5 million in marketing period fees that was part of the agreed upon loan. Attorneys for the distributor also claim that Goldman and the other co-defendants forced them to increased the cost of financing the deal by $140 million. Finally, the suit alleges that the defendants “made material misrepresentations and omissions of fact” in order to artificially spike the value of credit default swap (CDS) protection contracts held by the Bank’s hedge fund clients.”

Jill Sutton, UNFI’s Chief Legal Officer and General Counsel added: “We believe a review of the case’s details and facts shows that when the defendants had to choose between UNFI’s best interests and their own profits, they opted to put their financial motives first.

In the release, UNFI chief legal officer and general counsel Jill Sutton said the defendants “put their financial motives” above the distributor’s best interests.

“They sought to do this while blatantly breaching their agreements and, on information and belief, manipulating UNFI’s lending group in the process, which came to maintain interests that diverge from our interests,” she said. “Rather than respect its contractual obligations and the law, we believe Goldman Sachs played by its own set of rules both when dealing with us and CDS market participants, for its own benefit.”

“We feel we have an obligation to hold Goldman Sachs and others accountable for the ways in which they materially harmed UNFI and its shareholders in arranging the financing and managing related activities for our acquisition of Supervalu,” said UNFI chairman and CEO Steve Spinner in the release. “We expected our extremely well-paid transaction advisors to provide ethical counsel and unbiased support around this landmark acquisition—not leverage their positions to pursue larger profits for themselves and other clients at our expense and ongoing damage.

Spinner added that UNFI is “completely committed to the Supervalu combination.”

In an statement emailed to BevNET, Nicole Sharp, head of corporate communications at Goldman Sachs, said “Goldman Sachs believes that these claims are entirely without merit. We intend to vigorously defend ourselves against these accusations.”

Quinn Emanuel Urquhart & Sullivan, LLP and Coburn & Greenbaum PLLC are representing UNFI as external legal counsel.