Monthly Archives: June 2016

Long Term Effects of Tobacco II

** A Return to the Limits of In Re Tobacco II?  Courts Find That Not Every Advertisement is Part of a “Long-Term Campaign” **                                                                                                                                                                                              

London, England - May 20, 2016: Packets of Various Old Cigarette Boxes from the 1970's

We normally don’t blog about unpublished decisions because . . . lack of precedential value and all that . . . .  and that may turn out to be the case with the recent California Court of Appeal’s opinion in Santamarina v. Sears Roebuck & Co., B246705, 2016 WL 1714226, at *1 (Cal. Ct. App. Apr. 26, 2016) and the Ninth Circuit’s memorandum decision in Haskins v. Symantec Corp., No. 14-16141 (9th Cir. June 20, 2016).  But these decisions are simply too good for us to pass up the opportunity to post about them  – particularly for those who represent clients being sued under California’s CLRA or UCL based on foggy claims of consumer fraud.  Invariably, a defendant bringing a Rule 9(b) motion to dismiss or opposing class certification based on the putative class representative’s inability to identify the false advertisements she relied on will be met with the plaintiff’s invocation of the “long-term advertising campaign” language in In re Tobacco II Cases (Tobacco II), 46 Cal. 4th 298 (2009) – the salve that heals all reliance deficiencies.

Of course, Tobacco II dealt with a class representatives’ allegations of “a decades-long campaign of deceptive advertising and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease.”  46 Cal. 4th at 306 (emphasis added.)  Which is no exaggeration, Joe Camel was R.J. Reynolds’ pitchman for a decade — although it seemed much longer — and the Marlboro Man rode shotgun for Philip Morris for almost half a century.  Based on that allegation, the California Supreme Court held, “[W]here . . . a plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements.”  Id. at 328.  Despite the limited nature of this ruling, plaintiffs who have no idea what advertisements they may have seen frequently claim that the defendant engaged in a “long-term [false] advertising campaign.” Id.

Courts have shown varying degrees of willingness to go along with this class representative claim, particularly at the pleading and class certification stages.  Those that do, often quote this language from Tobacco II:  “The substantive right extended to the public by the UCL is the right to protection from fraud, deceit and unlawful conduct, and the focus of the statute is on the defendant’s conduct.” 46 Cal 4th at 324.  Courts accepting the “long-term advertising campaign” excuse for the plaintiff’s inability to identify the advertisements he relied on tend to read Tobacco II as a judicial declaration that the UCL and CLRA are primarily punish-the-defendant statutes and only secondarily consumer protection laws.

But in Santamarina – a case involving “Made in the USA” advertising by Sears for its Craftsman® tools – the California Court of Appeal scaled back the expansive readings of Tobacco II by other California courts.  In Santamarina, the putative class representatives were able to identify the specific advertising and labeling on which they relied so standing was not at issue as it was in Tobacco II.  In addition, falsity and materiality were not in dispute given California law on “Made in the USA” claims.  Moreover, discovery in the case apparently showed that Sears understood that “Made in the USA” was a valuable sales claim and internal marketing studies demonstrated that a significant percentage of consumers believed Craftsman® tools were made in the United States.

Despite the above, the Court of Appeal concluded that plaintiffs could not establish commonality or that the proposed class was ascertainable.  Notably, the plaintiffs defined the class as “All persons who purchased, in the State of California from January 6, 2001 through the present, any Craftsman branded tool or product where any unit or part thereof was entirely or substantially made, manufactured, or produced outside of the United States.”  The Court of Appeal agreed with the superior court that this definition doomed the proposed class under commonality and ascertainability requirements because the proposed class included consumers who never saw any Craftsman® “Made in the USA” advertising or labeling.  The Court of Appeal responded to plaintiffs’ incantation of Tobacco II by holding, “Given that the time period at issue was several years, and only some Sears advertising and marketing could potentially be found to be false or misleading, substantial evidence supported the trial court’s finding that the advertising at issue here is not equivalent to the decades-long campaign in Tobacco II.”  Particularly important are these words:  “In contrast to the evidence here, Tobacco II ‘involved identical misrepresentations and/or nondisclosures by the defendants made to the entire class.’” Santamarina, 2016 WL 1714226, at *10 (citing  Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 849.

For being designated as an unpublished opinion, the California Court of Appeal’s decision in Santamarina is unusually expansive in its analysis – covering 34 pages.  In contrast, Haskins v. Symantec is the soul of wit.  In a mere two paragraphs, the Ninth Circuit upheld the district court’s dismissal of a putative class action complaint alleging that Symantec failed to warn consumers that hackers had compromised the 2006 version of its ubiquitous Norton antivirus software.  The plaintiff claimed, among other things, that she relied on Symantec’s advertising that its software was secure (when it allegedly wasn’t) in buying it – without identifying the specific advertising.  The Ninth Circuit affirmed the district court’s dismissal under Rule 9(b) “[b]ecause Haskins’s complaint did not allege that she read and relied on a specific misrepresentation by Symantec.”  In response to the plaintiff’s predictable invocation of Tobacco II, the Ninth Circuit found that the plaintiff “failed to establish that the Tobacco II standard is applicable to her pleadings because the misrepresentations at issue here were not part of an extensive and long-term advertising campaign like the decades-long campaign engaging in saturation advertising targeting adolescents in Tobacco II.”

Two cases do not a trend make — especially when California law is involved.  But it is encouraging to see courts – even in unpublished decisions – return Tobacco II to its stated limits rather than assuming that any and every advertisement is part of a long-term campaign.

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A Proper Pick-off Play? Conditions on Payment May Make The Difference.

** District Court Judge Construes Campbell-Ewald Giving Daylight to Defendants Wanting to Moot Class Claims  **                                                                                                                                                                                                                    

We’ve recently blogged about the door left open by the U.S. Supreme Court in Campbell-Ewald Co. v. Gomez, 136 S. Ct. 663, 193 L. Ed. 2d 571 (2016) for mooting a putative class representative’s claim by the defendant depositing the full amount into an account payable to the plaintiff and the court entering judgment in that amount.  In Chen v. Allstate Ins. Co., No. 13-16816, 2016 WL 1425869, at *1 (9th Cir. Apr. 12, 2016), the Ninth Circuit slammed that door shut, saying, in essence, that a trial court should not enter judgment if the class representative rejects a Rule 68 offer of judgment  in order to pursue relief on behalf of members of a class even if the offer of judgment affords the individual plaintiff complete relief.  2016 WL 1425869, at *9As we noted in a recent post about Chen, while the Ninth Circuit distinguished Allstate’s “reversionary interest” in its money from the situation where a defendant deposited the money into a court registry and could not reclaim it, that distinction is without a difference because Federal Rule of Civil Procedure 67 requires notice to the plaintiff and a court order permitting the deposit giving the plaintiff the right to oppose it on the ground that she does not want the money because she (ahem . . . her lawyers) would rather pursue class relief.

This rather tortured analysis about who owns the money after it has left the defendant’s hands but has not been accepted by the plaintiff stems from three 19th century tax cases where the defendants actually paid the amounts allegedly owed to the State of California into bank accounts in accordance with a California statute that required the State to accept payments in full.  Under those circumstances, “[T]he railroad’s payments had fully satisfied the asserted tax claims, and so extinguished them.” Campbell-Ewald, 136 S. Ct. at 671. Thus, if the money changes hands, the case is over.  This motiff was picked up by the Ninth Circuit in Chen, in which the Court discussed the common law doctrine of tender upon which Rule 68 is based.  The Ninth Circuit noted that, under the tender doctrine, “[T]here may have been occasions when the deposit of money in court could be ‘treated as the equivalent of an actual payment to and acceptance by the plaintiff.’” (Citing, Robert G. Bone, “To Encourage Settlement”:  Rule 68, Offers of Judgment, and the History of the Federal Rules of Civil Procedure, 102 Nw. U.L. Rev. 1561, 1585 (2008)).  Chen, 2016 WL 1425869, at *8.  However, the Ninth Circuit concluded that for the deposit of funds to be treated as payment and acceptance, “the defendant [must] unconditionally relinquish[ ] its entire interest in the deposited funds” — in other words, only when “‘the defendant bids his money an eternal farewell.’” (Quoting H. Gerald Chapin, Code Practice in New York 164 (1918)).  Id.  But it seems a Sisyphean  task for a defendant to unconditionally relinquish its funds when the plaintiff won’t take them.

Just last week, however, the United States District Court for the District of Massachusetts found a way for a defendant to “bid [its] money an eternal farewell” in order to satisfy the demands of a putative class representative even when the class representative declines the payment.  In Demmler v. ACH Food Companies, Inc., No. 15-13556-LTS (D. Mass. June 9, 2016) (Dkt. No. 48), the defendant manufactured Weber barbecue sauces labeled “All Natural” in large lettering on the bottles.  Tragically, these delicious condiments contained caramel coloring.  And as sure as the sun does rise, ACH received a Demand for Relief pursuant to Massachusetts General Law, Chapter 93A §9(3) from the plaintiff’s attorney purporting to represent a consumer class.  ACH responded with a $75 check (statutory damages, trebled) and a letter that included the statement, in the Court’s words, “[T]hat ‘ACH is willing to offer’ a refund, and characterized the check as ‘the extent of [ACH’s] willingness to compromise under the circumstances.’”  Id. at 4.  Importantly, the Court noted that “the letter imposed no conditions or restrictions on the check it enclosed, either in the letter or on the face of the check.”  Id.

The correspondence battle continued between the attorneys, with the plaintiff’s attorney objecting to the tender because it didn’t provide class-wide relief and ACH asserting that the unaccepted $75 payment mooted the case.  Id.  The plaintiff then filed suit.  In a final flourish, defense counsel sent another $75 check — again without condition or restriction — that was, of course, rejected.  It is of some significance that the putative class action did not seek injunctive relief because ACH had stopped labeling its products as “All Natural” eight months prior to receiving the plaintiff’s Demand.  Id. at 5.  The case was thus limited to compensating the putative class and attorney fees.

The barbecue brouhaha came to an abrupt conclusion when the Court granted ACH’s Motion to Dismiss the case as moot.  The Court addressed Campbell-Ewald head on, distinguishing it on the basis that a Rule 68 offer of judgment is a settlement offer while ACH’s twice tender of $75 was a no-strings attached payment.  As the Court found, “This distinction makes all the difference.”  Id. at 6 – 7.  The trio of 19th century tax cases that temporarily vexed the majority in Campbell-Ewald made a brief but important appearance in the Court’s opinion – they were the basis (along with the Supreme Court’s intentionally narrow ruling in Campbell-Ewald) for the Court to hold that “Demmler’s refusal to accept the $75 is immaterial.”    “While ACH did not actually deposit the $75 check in an account payable to Demmler [as did the railroads in the 19th century tax cases] . . . ACH delivered the check to Demmler (or, more precisely, his attorney), entitling him to full possession of the $75.”  Footnote 5 of the Court’s opinion distills Judge Sorokin’s thinking on the issue:  “A defendant might condition, for example, satisfaction on the Plaintiff’s agreement to avoid litigation over whether the claim has become moot.  In such a circumstance, the offer, like a Rule 68 offer, does not render the case moot, because that Plaintiff’s is remedied only if it agrees to the mootness determination.” Id. at 8.

After concluding that ACH’s rejected payment to the plaintiff mooted his individual claim, the Court addressed the question of whether ACH’s payment was a pickoff play that might invoke the legally-questionable “inherently transitory” exception to the general rule divined from Justice Kagan’s dissent in Genesis Healthcarei.e., a claim that is “capable of repetition, yet evading review” may not be mooted by the termination (or, in this case, satisfaction) of the putative class representative’s claim.  Without conceding that the First Circuit ascribed to the inherently transitory exception, the Court interpreted First Circuit precedent to require that — if such an exception exists — it does so only when there is some pattern or practice of defense lawyers (either individually or as a group with respect to a specific class of claims) picking off plaintiffs.  Therefore, while it may be the practice of defense lawyers to pickoff plaintiffs in TCPA cases, “Demmler has offered no evidence that any ch. 93A defendants, let alone ACH specifically, has a pattern of engaging in such conduct.” Id. at 13 – 14.

What are the lessons of Demmler?  First and foremost, that Campbell-Ewald has not resolved the issue of whether paying or offering to pay a plaintiff the full value of her claim deprives her of standing as a class representative.  And second, if you’re going to try it, make the payment unconditional and don’t do it a lot.

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Sugar By Any Other Name Not Just As Sweet – Says FDA

** FDA concludes its study on “Evaporated Cane Juice” – issues guidance that it is a misleading description for mere Sugar **                                                                                                                                                                                                                

Candy shop at local bazaar in Barcelona, Spain.

On May 25, 2016, the Food and Drug Administration (FDA) issued guidance that it is false or misleading to describe sweeteners made from sugar cane as “evaporated cane juice.” Guidance for Industry: Ingredients Declared as Evaporated Cane Juice.

The FDA promised guidance before the end of 2016 – so they under-promised and over-delivered.  The FDA’s guidance reasoned that the term “cane juice”— as opposed to cane syrup or cane sugar—calls to mind vegetable or fruit juice, see 21 CFR 120.1(a), which the FDA said is misleading as sugar cane is not typically eaten as a fruit or vegetable.  See U.S. Department of Agriculture, Center for Nutrition Policy and Promotion. “Added Sugars.”  As such, the FDA concluded that the term “evaporated cane juice” fails to disclose that the ingredient’s “basic nature” is sugar. Guidance, Section III.  As support, the FDA cited the Codex Alimentarius Commission — a source for international food standards sponsored by the World Health Organization and the United Nations — which defines “raw cane sugar” in the same way as “evaporated cane juice.” Codex 212-1999.1.  The FDA therefore advised that “‘evaporated cane juice’ is not the common name of any type of sweetener and should be declared on food labels as ‘sugar,’ preceded by one or more truthful, non-misleading descriptors if the manufacturer so chooses.” Guidance, Section III.  The FDA’s decision comes after a 2009 draft guidance advising against using the term “evaporated cane juice” and a host of lawsuits against food companies that ignored the guidance.  Draft Guidance for Industry: Ingredients Declared as Evaporated Cane Juice (2009).

The FDA’s decision does not bode well for pending cases on this point.  As we have blogged about recently, many evaporated cane juice lawsuits are currently stayed awaiting the outcome of the FDA’s guidance, see, e.g., Gitson, et al. v. Clover-Stornetta Farms, Inc., Case No. 3:13-cv-01517-EDL (N.D. Cal. Jan. 7, 2016); Swearingen v. Amazon Preservation Partners, Inc., Case No. 13-cv-04402-WHO (N.D. Cal. Jan. 11, 2016).  And some have been revived on appeal – just in time – see Kane v. Chobani, LLC, No. 14-15670, 2016 WL 1161782, at *1 (9th Cir. Mar. 24, 2016) (overturning 2014 order from Northern District of California dismissing case).  These suits (and others) are now set to proceed in the wake of the FDA’s guidance.  Bear in mind, the guidance is not binding on courts and, in of itself, does not create a private right of action.  21 U.S.C. § 337(a) (“[A]ll such proceedings for the enforcement, or to restrain violations, of [the FDCA] shall be by and in the name of the United States”); see POM Wonderful LLC v. Coca-Cola Co., 573 U.S. ___ (2014); Buckman Co. v. Pls.’ Legal Comm., 531 U.S. 341, 349 n.4 (2001); Turek v. Gen. Mills, Inc., 662 F.3d 423, 426 (7th Cir. 2011); see also Smith v. U.S. Dep’t of Agric., 888 F. Supp. 2d 945, 955 (S.D. Iowa 2012) (holding that there is no private right of action regarding USDA statute).

In most false advertising cases, the governing test is what consumers, themselves, think – not what the FDA does.  For example, in Mason v. Coca-Cola Co., plaintiffs alleged that “Diet Coke Plus” was misleading because the word “Plus” implied the product was “healthy” under FDA regulations.  774 F. Supp. 2d 699 (D.N.J. 2011).  The court begged to differ: “At its core, the complaint is an attempt to capitalize on an apparent and somewhat arcane violation of FDA food labeling regulations . . .  not every regulatory violation amounts to an act of consumer fraud . . . . It is simply not plausible that consumers would be aware of [the] FDA regulations [plaintiff relies on].”  Id. at 705 n.4; see also Polk v. KV Pharm. Co., No. 4:09-CV-00588 SNLJ, 2011 WL 6257466, at *7 (E.D. Mo. Dec. 15, 2011);  In re Frito-Lay N. Am., Inc. All Natural Litig., No. 12-MD-2413 RRM RLM, 2013 WL 4647512, at *15 (E.D.N.Y. Aug. 29, 2013) (“[T]he Court [cannot] conclude that a reasonable consumer, or any consumer, is aware of and understands the various federal agencies’ views on the term natural.”)  Defendants in evaporated cane juice cases often assert that “evaporated cane juice” is a more accurate term than sugar to describe a type of sweetener that is made from sugar cane but undergoes less processing than white sugar.  See e.g., Morgan v Wallaby Yogurt Company, No. CV 13-0296-CW, 2013 WL 11231160 (N.D. Cal, April 8, 2013) (Mot. to Dismiss).  Those issues aside, many commentators believe the guidance will spur settlements – and they may be right.  The guidance may also spur a round of label changes for those who have not already abandoned the controversial term.

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Enhanced Food Labelling Guidelines

** FDA refreshes its Nutrition Facts label for packaged foods  **                                                                                                                                                      

Corn on spoon

On May 27, 2016, the FDA updated its “nutrition facts label” rule for packaged food products sold in the US.  See 81 FR 33741, 21 CFR 101.  The stated goal of the rule-making is to provide “updated nutritional information for most packaged foods sold in the United States, that will help people make informed decisions about the foods they eat and feed their families.

The new Nutrition Facts label will maintain its traditional look and feel, but will be updated to include, amongst other things:

  • A new design increasing the type size for “Calories,” “servings per container,” and the “Serving size” declaration, and bolding the number of calories and the “Serving size” declaration to highlight this information.
  • A mandatory footnote explaining “*The % Daily Value tells you how much a nutrient in a serving of food contributes to a daily diet. 2,000 calories a day is used for general nutrition advice.”
  • New requirements for “Added sugars” to be listed both in grams and as percent Daily Value.
  • New mandatory nutrients are included – Vitamin D and potassium are now required – and the rule drops the requirement for Vitamins A and C to be listed (which research has shown very few people are deficient in).
  • Removal of the “Calories from Fat” line item (as research shows that the type of fat is more important than the amount) – the requirement to list “Total Fat,” “Saturated Fat,” and “Trans Fat” remain.
  • In line with new research that indicates that prior “serving size data” underestimates the typical amount consumed, the rule updates the reference amount for different types of foods – for example, the reference amount used to set a serving of ice cream was previously ½ cup but is changing to ⅔ cup. The reference amount used to set a serving of soda is changing from 8 ounces to 12 ounces.
  • And where a products is larger than the reference size for a single serving – but where the item could be consumed in one sitting or more multiple sittings — manufacturers will need to provide “dual column” labels to indicate the amount of calories and nutrients on both a “per serving” and “per package”/“per unit” basis.

A comparison between the original vs. the new labels makes the effect of the changes clear:

lable 

Most food manufacturers will be required to use the new label by July 26, 2018.  However, manufacturers with less than $10 million in annual food sales will have an additional year to comply.

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