The recent decision to strike Nestle SA, Danone SA, and Hero AG from the list of defendants in a multi-district litigation alleging their subsidiaries knowingly sold baby food tainted with toxic heavy metals has sent shockwaves through the consumer goods industry. The three multinational corporations, who were initially accused alongside other baby food makers and grocery chains, have successfully argued that they had no part in the health and safety processes at their subsidiaries.
The Background: A Study and a Congressional Investigation
Leading up to the multi-district lawsuit were two major discoveries that shed light on the shocking allegations. A study conducted by the non-profit organization “Happy Babies Bright Futures” found that of the 168 commercially available baby foods tested, all but 9 had at least one metal, and most contained more than 1. This study highlighted the alarming levels of toxic heavy metals found in baby foods. In addition, a Congressional investigation uncovered that manufacturers, including those making Gerber, Nurture, and Beech-Nut products, played fast and loose with their own safety limits, allowing unsafe products to enter the market. The investigation revealed that these companies would often flout their own safety limits, putting the health of consumers at risk.
The Argument of the Three Companies
Nestle SA, Danone SA, and Hero AG argued that the US courts had no jurisdiction over them, citing their multinational nature and lack of presence in the US. Nestle stated that it was the parent of “hundreds of separate corporate entities all over the world” and was not registered to do business in the US. The company emphasized that it did not control the manufacturing, advertising, distributing, marketing, contracting, or sales activities of its subsidiary, Gerber Products Company. Similarly, Hero AG argued that it had no presence in the US and did not control the day-to-day management of Beech-Nut Nutrition Company. Hero stated that shared marketing and branding materials did not suffice to establish personal jurisdiction over a parent entity. Danone SA followed a similar route, stating that it was the “ultimate parent company to 291 food-related subsidiaries across 70 countries and five distinct entities exist between Danone SA and Nurture LLC.” The company claimed that it did not have a part in Nurture’s day-to-day operations nor did it control what Nurture products were sold in the US.
The Challenges Faced by Beech-Nut and Others
Unlike their parent companies, the three baby food subsidiaries, Beech-Nut Nutrition Company, Gerber Products Company, and Nurture LLC, remained accused in the litigation. The plaintiffs demonstrated their “manufacturing defect,” i.e., that the companies made products in substandard condition. According to the judge’s ruling, the plaintiffs alleged that the manufacturers prepared internal product specifications for heavy metals in ingredients and completed products. The plaintiffs also alleged that the manufacturers failed to consistently adhere to those specifications, which meant that different batches of a product may have had different levels of heavy metals based on which ingredients were deemed acceptable. These allegations laid out a plausible theory that one instance of a product may differ from another in the amount of heavy metals, depending on whether the product specification was actually applied. Accepting the truth of these allegations, the manufacturing defect claim advanced.
The Representation of the Parties
Skadden Arps Slate Meagher & Flom LLP represents Hero; Wachtell Lipton Rosen & Katz represents Danone; and Mayer Brown LLP represents Nestlé. Wagstaff Law Firm and Wisner Baum LLP represent the plaintiffs.
The Implications of the Decision
The recent decision to strike Nestle SA, Danone SA, and Hero AG from the list of defendants has significant implications for the consumer goods industry. It highlights the complex nature of corporate responsibility and the challenges faced by manufacturers in ensuring the safety of their products. As the litigation continues, it remains to be seen how the case will unfold and what the ultimate outcome will be for the plaintiffs and the defendants. It is worth noting that the decision does not necessarily imply that the three companies are completely absolved of any wrongdoing. The plaintiffs may still have a viable claim against the companies, and the litigation will likely continue to shed light on the issue of corporate responsibility in the food industry.