Monthly Archives: October 2016

Container Size Speaks Volumes in a Lanham Act Case

** District Court Rejects Slack Fill Defendant’s Claims That Package Size is Not Commercial Speech **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        .

Cardboard Boxes Balancing on a Seesaw

We’ve blogged about the rise in slack-fill consumer class actions and, specifically, the numerous actions brought against McCormick and Company for allegedly under filling its red, white and blue pepper tins.  These lawsuits were consolidated and transferred to the United States District Court for the District of Columbia in December 2015.  Curiously, one individual action initially brought in Minnesota federal court was allowed to come along for the ride – and it was this single-plaintiff lawsuit that started the avalanche of consumer actions against McCormick.  “Who was the plaintiff?” you ask.  McCormick’s competitor, Watkins, Inc., claiming a Lanham Act violation for the alleged slack-fill in McCormick’s pepper tins.  Watkins filed its complaint on June 9, 2015, and a week later, the consumer class actions started cascading downhill.

Lanham Act cases are very different beasts from consumer class actions even though they both focus on alleged misrepresentations made to consumers.  In a Lanham Act lawsuit, the competitor is trying to collect lost profits (or disgorgement of the defendant’s profits) due to “a false or misleading representation of fact” in “commercial advertising or promotion.”  15 U.S.C. § 1125(a)(1).  In a consumer class action, on the other hand, the class representative is trying to recover for the class either the entire purchase price of the product or the “price premium” class members paid for it based on the misrepresentation under state statutes and common law.

Slack-fill cases, of course, do not involve words – rather, they focus on the size of the package.  As the FDA elucidates:  “A container that does not allow the consumer to fully view its contents shall be considered to be filled as to be misleading if it contains nonfunctional slack-fill. Slack-fill is the difference between the actual capacity of a container and the volume of product contained therein. Nonfunctional slack-fill is the empty space in a package that is filled to less than its capacity.”  21 C.F.R. § 100.100(a).  In McCormick’s case, it sought dismissal of Watkin’s complaint on the theory (among others) that a container’s size is not “commercial advertising and promotion” because no words are involved”, citing Farah v. Esquire Magazine, 736 F.3d 528, 541 (D.C. Cir. 2013), where the court concluded that the Lanham Act only applies to “commercial speech.”

In this case of first impression – there are no other reported cases of one competitor suing another over slack-fill – Judge Ellen Segal Huvelle was not buying what McCormick was selling:  “McCormick argues that size of its pepper tins is not commercial speech, but it is difficult to understand how the size of a package or container could possibly not be considered a form of ‘advertising or promotion.’  The size of a package signals to the consumer vital information about a product and is as influential in affecting a customer’s choices as an explicit message on its surface.”  Memorandum Opinion, MDL Docket No. 2665, Misc. No. 15-1825 (ESH) (October 17, 2016).  The court analogized package size to other non-verbal advertising, such as images appearing on a product’s container.  In sum, like Depeche Mode, Judge Huvelle concluded that “words are very unnecessary” to make out a Lanham Act claim.

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Alert: Ninth Circuit Opens A Door For All Natural Class Claims

** Appeal Court Panel Holds That Genuine Dispute Remained As To Whether All Natural Claims Would Survive Reasonable Consumer Test **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      hires-2Judge Lucy H. Koh gave all natural class defendants cause for celebration back in 2014 when she closed the door on a putative class representative’s claim that Dole’s fruit juices and fruit cups were wrongfully labelled as “All Natural.”  Brazil v. Dole Packaged Foods, LLC, No. 12-CV-01831-LHK, 2014 WL 6901867 (N.D. Cal. Dec. 8, 2014).  Last week, however, the Ninth Circuit re-opened that door slightly – at least enough for the plaintiffs’ bar to try to squeeze their feet in.

Mr. Brazil alleged in his 2012 Complaint that Dole’s fruit cups and fruit juices were falsely labelled as “All Natural” because they contained citric acid (i.e. vitamin C) and ascorbic acid (used to prevent discoloring).  Dole successfully argued on summary judgment that Plaintiff had failed to show that a significant portion of the consuming public or of targeted consumers, acting reasonably under the circumstances, would be misled by its labeling.  Id. at *4, citing Lavie v. Procter & Gamble Co., 105 Cal.App. 4th 496, 507 (2003).  Plaintiff’s own opinion about the added Vitamin C and absorbic acid was not enough.  Id.  Neither was his rationale that a reasonable consumer could be misled by virtue of a label that violated FDA guidance on the topic (the FDA is not a reasonable consumer and vice versa, Judge Koh reasoned).  Further, in a prior ruling, Judge Koh decertified Plaintiff’s main damages class because Plaintiff’s damages model (or lack thereof) failed the threshold test of Comcast Corp. v. Behrend, 569 U.S. ___ (2013), i.e., that damages could be adequately calculated with proof common to the class.  Brazil appealed both the summary judgment and decertification decisions.

The Ninth Circuit affirmed in part and reversed in part.  Brazil v. Dole Packaged Foods, LLC, No. 14-17480, 2016 WL 5539863, at *1 (9th Cir. Sept. 30, 2016).

The good news is that the Ninth Circuit agreed with Judge Koh’s decertification of the damages class – and by so doing signaling that the Circuit will continue adhering to the Comcast principle that Plaintiffs have the burden of demonstrating a viable class-wide basis of calculating damages.  It held that the lower court correctly limited damages to the difference between the prices customers paid and the value of the fruit they bought—in other words, the “price premium.”  2016 WL 5539863, at *2 – 3, citing In re Vioxx Class Cases, 103 Cal. Rptr. 3d 83, 96 (Cal. Ct. App. 2009).  The Ninth Circuit reiterated that under the price premium theory, a plaintiff cannot be awarded a full refund unless the product she purchased was worthless – which in this case – the fruit was not.  Id. citing In re Tobacco Cases II, 192 Cal. Rptr. 3d 881, 895 (Cal. Ct. App. 2015).  Because Mr. Brazil did not (and presumably could not) explain how this premium could be calculated across a common class, the motion to decertify was rightly decided.  Id. at *3.

The bad news is that the Appeals Court rejected the lower court’s reasoning that bare allegations of an individual’s claims of deception were insufficient to show the reasonable consumer would be equally deceived.  Troublingly, the court used the FDA’s informal policy statement (see Janney v. Mills, 944 F. Supp. 2d 806, 812 (N.D. Cal. 2013) (citing 58 Fed. Reg. 2302–01)) on the issue as determinative of the reasonable consumer standard.  As one commentator has noted, this converts informal guidance into binding authority.

With the damages class gone, the Ninth Circuit remanded the case for a determination of Plaintiff’s injunctive relief class.  That may be a pyrrhic victory in the end.  As we have blogged in the past, a plaintiff who is aware of the supposed deception is not in a position, as Pete Townshend penned, to be fooled again.

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Proving a Negative

** Plaintiffs in a Putative Class Action Successfully Rely on Internet Articles on Homeopathy to Support Their Falsity Claims **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            .

Close up of the word HOMEOPATHIE in an old French dictionary. Selective focus and Canon EOS 5D Mark II with MP-E 65mm macro lens.

One of the few dependable defenses on which nutritional supplement/homeopathic drug makers facing consumer class actions can rely is that false advertising claims cannot rest on an allegation that the advertising lacks substantiation .  In the ground-breaking case of Nat’l Council Against Health Fraud, Inc. v. King Bio. Pharm., Inc., 107 Cal. App. 4th 1336 (2003), the California Court of Appeals held that it is not enough for a plaintiff to allege that the defendant’s products were ineffective because there is “no scientific basis for [their] efficacy.”  Id. at 1340-41.  In King Bio. Pharm, the plaintiff advocated that the defendant should bear the burden of proving its homeopathic remedies worked.  The California Court of Appeal disagreed, finding that — while regulatory agencies are legally authorized to demand substantiation — private parties are not, id. at 1345.  This is an eminently reasonable decision — otherwise, the plaintiffs’ bar would bring “ready, shoot, aim” lawsuits.

The question arises, of course, as to what level of “proof” is necessary for a putative class representative to sustain a claim of false advertising/labeling.  Must plaintiff’s counsel hire experts to perform double blind studies?  Or is a literature review all that is necessary?  This issue is front and center and may have reached its logical extreme in an important case in the U.S. District Court for the Southern District of California, Hammock et al. v. Nutramarks Inc. et al., case number 3:15-cv-02056 (2015) – a case that implicitly threatens the entire homeopathic medicine industry.

Homeopathy is the brain child of the German alternative physician, Samuel Hahnemann (1755-1843), who has a fabulous monument dedicated to him on Scott Circle in D.C.  Hahnemann developed the concept similia similibus curantur – or “like cures like.”  The idea is that a disease causes symptoms, and by treating patients with a substance that causes the same symptoms as the disease, the disease can be cured – like cures like.  By way of example, homeopathic medicines intended to remedy colds may include onions because onions cause watery eyes and runny noses – the precise symptoms of the common cold.

Dr. Hahnemann, however, did not want his medicines to produce the same symptoms the patient was already suffering from so he created a preparation protocol known as “extreme dilution.”  The active ingredient would be diluted with water or alcohol and the container would then be banged against an elastic surface (usually, a leather book) to the point that few of the molecules of the active ingredient remained.  In the world of homeopathic medicine, the more diluted the remedy, the  higher its potency and more effective it is.

Homeopathic medicine was heralded upon its entry into the United States in 1835, primarily because –unlike traditional medicine of the time – it didn’t kill patients (like mercury tinctures) and wasn’t gross (like leaching).  As modern medicine evolved, however, homeopathy came to be branded by the “traditional” medical industry as quackery.  Nevertheless, to this day, homeopathic drugs are treated (as opposed to nutritional supplements) by the FDA under Section 201(g)(1) of the Food, Drug and Cosmetic Act.

Which brings us back to the Nutramarks case.  In Nutramarks, the plaintiffs allegedly purchased NatraBio® Smoking Withdrawal, Leg Cramps, Restless Legs, Cold and Sinus Nasal Spray, Allergy and Sinus, Children’s Cold and Flu Relief, and Flu Relief homeopathic products.  Did the plaintiffs’ lawyers conduct any independent research to determine whether these products were effective prior to filing the lawsuit?  Of course not.  Did the plaintiffs’ lawyers cite any previously published studies about the challenged products?  Nope.  Did the plaintiffs’ lawyers cite any research on the efficacy of the ingredients in the products?  Nyet.  So what did the plaintiffs use to satisfy their plausibility burden under Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)?  Answer:  Internet articles challenging homeopathy as a whole.

Nutramarks pushed back on the complaint asserting in a motion to dismiss that relying on internet articles that did not involve its products or the constituents of its products was not enough, citing Murray v. Elations Co., No. 13-CV-02357-BAS WVG, 2014 WL 3849911, at *7 (S.D. Cal. Aug. 4, 2014) (studies “must have a bearing on the truthfulness of the actual representations made by Defendants”).  Nutramarks also argued that, because some experts believe that homeopathic remedies are effective, the action must be dismissed under In re GNC Corp., 789 F.3d 505, 516 (4th Cir. 2015), in which the court held that “[i]n order to state a false advertising claim on a theory that representations have been proven to be false, plaintiffs must allege that all reasonable experts in the field agree that the representations are false.”

In Nutramarks, Chief Judge Moskowitz rejected these arguments and denied the motion to dismiss as it pertained to the products’ effectiveness.  (The Court dismissed plaintiffs’ claims for injunctive relief and breach of implied warranty.)  Judge Moskowitz saw nothing deficient in the plaintiffs’ failure to cite studies relating to defendants’ products or the ingredients in its products: “Although the Complaint only concerns the effectiveness of Defendants’ Products, Plaintiffs are alleging that homeopathy in general is ineffective.  Should Plaintiffs prove this allegation later on, Defendants’ Products would likewise be proven to be ineffective.”  As to Nutramarks’ “all reasonable experts” argument, the Court distinguished the Fourth Circuit’s opinion in In re GNC Corp. on the basis that In re GNC Corp dealt with false advertising and Nutramarks concerns alleged false labeling.  This latter holding is a stretch.  Indeed, the plaintiffs didn’t make the argument for it in their opposition — although they cited the same language from In re GNC Corp that Judge Moskowitz relied on.

The language from In re GNC Corp reads, “Our holding today should not be interpreted as insulating manufacturers of nutritional supplements from liability for consumer fraud.  A manufacturer may not hold out the opinion of a minority of scientists as if it reflected broad scientific consensus.  Nevertheless, we need not decide today whether any of the representations made on the Companies’ products are misleading, because Plaintiffs chose not to include such allegations in the [complaint].”  The most important sentence in this dicta is the second because it highlights the precise representation – be it on a print advertisement or on the bottle, itself — that the Fourth Circuit didn’t want its opinion to absolve — a manufacturer falsely claiming that  there is broad consensus supporting its health claim when it is really only the opinion of a minority of scientists.  This claim appears nowhere on any of Nutramarks’ packaging challenged by the plaintiffs.

In the end, it is clear from the Fourth Circuit’s opinion in In re GNC Corp that the panel was convinced that there really would be an impermissible “battle of the experts” as to the efficacy of glucosamine and chondroitin for joint health if the case were to proceed past the motion to dismiss.  The label of one of the challenged products referenced a private study showing the effectiveness of the ingredients.  In a footnote, the Court stated (with just a bit of sarcasm), “Although Plaintiffs were free to allege that the study cannot have been conducted in a reasonable or reliable way (because all reasonable experts support the opposite conclusion), they failed to do so.  We decline to speculate as to why, if the evidence is as clear and unequivocal as they claim, Plaintiffs exhibited such hesitation.”

Of course, all is not lost for Nutramark or the homeopathic medicine industry in general.  Just last year, a California jury returned a verdict in favor of a manufacturer of homeopathic products for, among other things, allergies, leg cramps, migraine headaches and sleeplessness finding that the plaintiffs could not sustain their burden of showing lack of efficacy.  Allen et al. v. Hyland’s Inc. et al., 2:12-cv-01150 (Central District).

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