Consumer Class Action

Are You Shipping Me! Is Delivery Charging The Next Big Thing In Consumer Class Actions?

** Shipping and Handling Case Dismissed in California – Beginning of the End? **                                                                                                                                                                                                                                                                                                                                            

Lately, there’s been quite a bit of buzz over a couple of lawsuits filed in California alleging that internet retailers are charging too much for shipping and handling:  Reider v. Electrolux Home Care Products, Inc., No. 8:17-cv-00026-JLS-DFM (C.D. Cal) and McCoy v. Omaha Steaks International, Inc., No. BC 658076 (Cal. Sup. Ct, L.A. Cnt’y).  Much of the reporting on these cases focuses on the possibility that this claim may be the next big thing in consumer class actions.  How likely is that?

The answer, of course, is “Who knows?”  But a closer inspection of the lawsuits suggests that this litigation too shall pass — and perhaps quickly.  First, both lawsuits were filed by Scott J. Ferrell, the founder of Pacific Trial Attorneys, who is no stranger to consumer class actions against online retailers having brought several under California’s Automatic Renewal Statute. California Business and Professions Code §17600, et seq.  But there hasn’t yet been a break out of these shipping and handling cases.  And second, the Electrolux action is over via a joint stipulation to dismiss filed just yesterday after the District Court granted Electrolux’s motion to dismiss with the observation that any attempt to amend would likely be futile.  Dkt. No. 30, May 8, 2017.

The plaintiff in Electrolux pursued a novel theory of liability in a case where it was undisputed that he was apprised of the shipping charges prior to purchase.  Indeed, there was no way plaintiff could have missed the disclosure because he had to actually choose between shipping options with different charges at the time of purchase:  Ground Service at $7.99; Second Day Air at $15.00; and Next Day Air at $25.00.  (He judiciously chose ground service given his purchase was for a $1.99 vacuum bag.)  Faced with those facts, plaintiff honed in on the unfair prong of California Business & Profession Code § 17200, which prohibits and makes actionable “unlawful, unfair or fraudulent” business practices.

While California courts have not addressed the unfair prong in consumer lawsuits, the Ninth Circuit has – holding that for a business practice to be unfair to consumers it must either:  (1) violate a “legislatively declared” policy; or (2) fail a balancing test that weighs the benefit to the company against the harm to consumers.  Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 736 (9th Cir. 2007).  In Electrolux, the plaintiff argued that the guidelines of the Direct Marketing Association (“DMA”) that encourage retailers to make sure that their shipping and handling charges bear a reasonable relationship to the actual costs of shipping and handling and a 1980 FTC consent order prohibiting a car dealer from charging more than its actual costs in shipping cars to its showroom reflect a public policy against excessive shipping and handling charges and show that the balance tilts to consumers.

The District Court disagreed.  Dkt. No. 27, April 21, 2017. The “legislatively declared” policy was an easy call – neither the DMA nor the FTC are legislatures.  On the balancing test, the District Court found that there was simply no harm to the plaintiff and, therefore, nothing against which to balance Electrolux’s benefit.  Striking a blow for free markets everywhere, the court observed, “Online shoppers are aware that online merchants are in the business of making money and generating profit, and those looking for the best deals will find their way to the merchants who offer the best combination of quality, price, and service.”  In what should become known as the “Mini Bar Rule,” the court cited Searle v. Wyndham Int’l, Inc., 102 Cal. App. 4th 1327, 1330 (2002) – a case where plaintiffs unsuccessfully challenged a hotel chain’s mandatory 17% service charge:

“Perhaps the best analogy is the one made in Searle. The hotel room guest knows he could buy the $3 minibar candy for less at a neighborhood store. Perhaps he pays the high price so he can stay in his comfortable robe and enjoy the high-priced, in-room movie. In any event,“[t]he minibar patron, like the room service patron, is given both clear notice the service being offered comes at a hefty premium and the freedom to decline the service.” Searle, 102 Cal. App.4th at 1334.” (Dkt. No. 27 at 6).

The District Court in short order dispatched plaintiff’s Consumer Legal Remedies Act claim that the practice of charging inflated shipping and handling fees is deceptive because consumers believe that the charges are reasonably related to the company’s actual costs by noting that Electrolux makes no such representation.

But what of the second shipping and handling charge case —  McCoy v. Omaha Steaks International, Inc., CA Sup. Court, County of Los Angeles, Case No. BC 658076?  That case was filed in Los Angeles Superior Court on April 14, 2017 – a week before the District Court’s decision in Electrolux.  The claims are the same.  The support is the same.  We’ll have to wait and see if the superior court and the federal court agree.

Share this:
Facebooktwitterlinkedin

Healthy Conscious

** FDA Updating Requirements for “Healthy” Claims on Food Labeling **

One of the trending areas we have blogged about last year was “healthy” claims in food labelling becoming the new “all natural” target; see Hunter v. Nature’s Way Prod., LLC, No. 16CV532-WQH-BLM, 2016 WL 4262188, at *1 (S.D. Cal. Aug. 12, 2016) (Coconut Oil); Campbell v. Campbell Soup Co., No 3:16-cv-01005 (S.D. Cal. August 8, 2016) (Dkt 18) (Healthy Request® canned soups); Lanovaz v. Twinings N. Am., Inc., No. 5:12-CV-02646-RMW (N.D. Cal. September 6, 2016) (Twinings bagged tea).  It is a lucrative area for the plaintiff’s bar.  James Boswell et al. v. Costco Wholesale Corp., No. 8:16-cv-00278 (C.D. Cal) (recent $750,000 coconut oil settlement based on “healthy” labeling).

In many respects this trend was kicked off in 2015 by the Food & Drug Administration (FDA) who issued the KIND® company a not so kind letter asking the company, pursuant to 21 U.S.C. § 343(r)(1)(A) to remove any mention of the term “healthy” from its packaging and website.  See our prior blog post.  The basis for the FDA’s action is that the term “healthy” has specifically defined meanings under 21 CFR 101.65(d)(2) which includes objective measures such as saturated fat content (must be > 1 g) (see 21 CFR 101.62(c)(2)).  Later in 2016 the FDA seemingly had a change of heart – emailing Kind and stating that the company can return the “healthy” language – as long use “healthy” is used in relation to its “corporate philosophy,” not as a nutrient claim.

Notably, this sparked a wider public health debate about the meaning of “healthy” and whether the focus, for example on the type of fat rather than the total amount of fat consumed, should be reconsidered in light of evolving science on the topic.  In September 2016 the FDA issued a guidance document (Guidance for Industry: Use of the Term “Healthy” in the Labeling of Human Food Products) stating that FDA does not intend to enforce the regulatory requirements for products that use the term healthy if the food is not low in total fat, but has a fat profile makeup of predominantly mono and polyunsaturated fats.

The FDA also requested public comment on the “Use of the Term “Healthy” in the Labeling of Human Food Products” – which comment period ended this week. Comments poured in from consumers and industry stakeholders, reaching 1,100 before the period closed on April 26, 2017. The FDA has not provided a timeline as to when revisions to the definition of “healthy” might occur following these public comments – and it is not clear if President Donald Trump’s January executive order, requiring that two regulations be nixed for every new rule that is passed, will hinder the FDA’s ability to issue a rulemaking on the term “healthy” in the near future.  It is also not clear whether the FDA will combine the rulemaking with its current musing of use of the term “natural” – as the terms are sometimes used synonymously.  Industry groups (and the defense bar) are hopeful though that some clarity will come sooner rather than later.

Share this:
Facebooktwitterlinkedin

Sugar in Missouri

** Do we have a new “sue-me” State for Food and Class Litigators? **                                                                                                                                                                                                                                      As we blogged about in the past the Food and Drug Administration (FDA) issued guidance in 2016 that it is false or misleading to describe sweeteners made from sugar cane as “evaporated cane juice” (ECJ). Guidance for Industry: Ingredients Declared as Evaporated Cane Juice.  As anticipated this has opened the way forward for cases against companies using the ECJ term, including of course those cases where the matter had been stayed under the primary jurisdiction doctrine.  Much of this ECJ litigation continues to be focused in state and federal courts in California.

That said, plaintiffs are also filing in other venues.  Missouri for one is becoming increasingly well-known as a plaintiff-friendly jurisdiction following full throated verdicts in product liability cases, such as the $70 million talcum powder case.  And food labeling suits are increasingly being filed as well in this new “sue me” State (in particular, St. Louis City – the 22nd Judicial Circuit, has been called one of “worst places in the nation for a corporation to be sued” and the new hot spot for litigation tourists.”)  In a recent win for the Plaintiff’s bar with respect to food litigation and labeling claims, a Missouri state court of appeals recently issued an opinion rejecting defenses successful in sister courts. In Murphy v. Stonewall Kitchen, LLC, 503 S.W.3d 308, 310 (Mo. Ct. App. 2016) brought under the Missouri Merchandising Practices Act (MMPA) the plaintiff (and putative class representative) alleged Stonewall Kitchen misrepresented that its cupcake mix was “all natural” when it contained leavening agent sodium acid pyrophosphate (SAPP).  The trial court, relying on the  decision in Kelly v. Cape Cod Potato Chip Co., 81 F.Supp.3d 754 (W.D. Mo. 2015), granted the motion reasoning that because the ingredient label clearly disclosed the presence of SAPP, it was not plausible that a consumer would believe the “all natural” representation on the product including the SAPP.  The Court of Appeals reversed, expressly rejecting the ingredient list defense.

Since Murphy, at least 16 cases have recently been filed in St. Louis on the topic of evaporated cane juice alone.  The targeted defendants include manufacturers of Pacqui Corn Chips (Dominique Morrison v. Amplify Snack Brands Inc., No. 4:17-cv-00816-RWS (E.D. Mo.), Jelly Belly jelly beans(Jason Allen v. Jelly Belly Candy Company, No. 4:17-cv-00588 (E.D. Mo.), and Bakery on Main granola (Callanan v. Garden of Light, Inc., No. 4:17-cv-01377 (E.D. Mo.).  The cases do appear connected, many having the same plaintiff’s counsel.  It is likely too early to call St. Louis the new “food court” – we’ll monitor it throughout the year though to see if it is a “flash in the pan” or not.

Share this:
Facebooktwitterlinkedin

Unresolved Issues in Web Accessibility Consumer Lawsuits

** Despite Rash of Lawsuits by Private ADA Litigants, Major Web Accessibility Issues under Title III Remain Unresolved in 2016**                                                                                                                                                                                                                                                                                

Website Accessibility has been an expanding battleground for the plaintiffs’ bar over the past several years.  Title III of the ADA provides that “no individual shall be discriminated against on the basis of disability in the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation.”  42 U.S.C. § 12182.  “Public accommodations” includes private enterprises whose operations affect commerce and who fall within one of twelve enumerated categories (broadly covering everything from grocery stores to amusement parks to places of education).  42 U.S.C. § 12181(7).  Specifically, Title III imposes requirements on businesses to provide “auxiliary aids and services” to the disabled where such aids are necessary for effective communication unless the entity can demonstrate that taking such steps would fundamentally alter the nature of the goods, services, facilities, privileges, advantages, or accommodations being offered or would result in undue burden.  42 U.S.C. § 12182(b)(2)(A)(iii); 28 C.F.R. § 36.303.  For website owners, the most common accommodation for the disabled is embedding code beneath graphics that makes it possible for assistive technologies to access information and navigate websites.  According to the World Wide Web Consortium (W3C), an international body that develops open standards and guidelines for web developers, there are hundreds of such design options to make a website accessible such as providing links to definitions, removing time limits for activities, providing spoken word versions of text, and ensuring keyboard control for all website functions.

Under the auspices of Title III, plaintiffs’ attorneys have filed hundreds of accessibility suits in the past year claiming that websites are failing to provide necessary accommodations – their favorite target being deep pocketed online retailers.  Notably, only a handful of ADA focused firms are filing these cases — reports show that over 90% of the suits are bought by just 8 different  law firms.  Yet despite the attention garnered by this rash of law suits, two critical issues were NOT resolved in 2016.

The first unresolved issue: Does Title III —  enacted in the pre-internet era (all the way back in 1990) — even apply to websites (and if so, which ones)?  The Third, Sixth, Ninth and Eleventh Circuits apply the ADA only to websites that have a physical connection to goods and services available at one of the enumerated places of accommodation listed in 42 U.S.C. § 12181(7) i.e. extending the ADA only so far as the online version of a company’s physical store or location.  Accordingly, goods and services without a sufficient nexus to a physical location are not covered by Title III.  See, e.g., Weyer v. Twentieth Century Fox Film Corp., 198 F.3d 1104, 1114-16 (9th Cir. 2000) (requiring some connection between the goods or services complained of and an actual physical place); Ford v. Schering-Plough Corp., 145 F.3d 601, 612-13 (3d Cir. 1998) (finding no nexus between challenged insurance policy and services offered to the public from insurance office); Parker v. Metropolitan Life Ins., 121 F.3d 1006 (6th Cir. 1997); Earll v. eBay, Inc., 599 F. App’x 695, 696 (9th Cir. 2015) (ADA claim fails because eBay’s services not connected to any physical place); Cullen v. Netflix, Inc., 600 F. App’x 508, 509 (9th Cir. 2015) (Netflix not subject to ADA because Netflix’s services not connected to any physical place); Young v. Facebook, Inc., 790 F. Supp. 2d 1110 (N.D. Cal. 2011) (ADA claim fails because Facebook’s internet services do not have a nexus to a physical place of public accommodation).

The Second and Seventh Circuits, on the other hand, apply the ADA more broadly. See, e.g., Carparts Distrib. Ctr., Inc. v. Automotive Wholesaler’s Assoc. of New England, Inc., 37 F.3d 12 (1st Cir. 1994) (finding Title III not limited to physical places); Nat’l Fed’n of the Blind v. Scribd, 97 F.Supp. 3d 565 (D. Vt. 2015) (finding website with no nexus to a physical space covered by Title III); Nat’l Assoc. of the Deaf v. Netflix, Inc., 869 F. Supp. 2d 196 (D. Mass. 2012) (finding website with no nexus to a physical space covered byTitle III); cf. Doe v. Mutual of Omaha Ins. Co., 179 F.3d 557, 559 (7th Cir. 1999) (finding Title III coverage of websites in dicta); Morgan v. Joint Admin. Bd., Ret. Plan of the Pillsbury Co., 268 F.3d 456, 459 (7th Cir. 2001) (same); see also Nat’l Assoc. of the Deaf, et al. v. MIT, 15-cv-30024, 2016 WL 6652471 (D. Mass. Nov. 4, 2016) (denying motion to stay or dismiss claim that defendant violated Title III of the ADA and Section 504 of the Rehabilitation Act by failing to caption its online content); Nat’l Assoc. of the Deaf, et al v. Harvard Univ., 15-cv-30023, 2016 WL 6540446 (D. Mass. Nov. 3, 2016) (same).  This circuit split will have to be resolved by the Supreme Court or by congressional intervention.

Which brings us to the second unresolved issue: Will the Department of Justice, pursuant to its statutory authority to promulgate regulations to implement Title II & III, step in and give some guidance on what specific technical accommodations are required (and which are not)?  On July 26, 2010, the Department issued an Advanced Notice of Proposed Rulemaking (“ANPRM”) on Accessibility of Web Information and Services of State and Local Government Entities and Public Accommodations announcing the Department’s interest in developing more specific requirements or technical standards for website accessibility.  75 Fed. Reg. 43,460 (July 26, 2010).  In the ANPRM, the Department reaffirmed its longstanding position that the ADA applies to websites as public accommodations and reiterated, consistent with the preamble to the 1991 regulations, that the ADA should be interpreted to keep pace with developing technologies.  Id. at 43,464 (“The Department has also repeatedly affirmed the application of Title III to Web sites of public accommodations.”) The Department recognized, however, that in light of inconsistent court decisions on website-related obligations and differing technical standards for determining web accessibility, further guidance was warranted.  Id.  Despite these aspirational statements, the DOJ has yet to finalize its guidance.  Instead, on May 9, 2016, it issued a lengthy Supplemental ANPRM (SANPRM) for state and local government websites, and then extended the comment period.  With those delays — as well as the advent of a new administration — the Title II regulations (for governmental entities) will be pushed back into 2017 and the Title III regulations (which are expected to closely mirror the ones for Title II) to (at the earliest) the end of 2017.  In the meantime, the DOJ appears to be satisfied  intervening on a case by case basis through statement of interest filings (Nat’l Assoc. of the Deaf v. Netflix, Inc., 869 F. Supp. 2d 196 (D. Mass. 2012); Gil. v. Winn-Dixie Stores, Inc, 16-cv-23020 (S.D. Fl. Dec. 12, 2016) (Statement of Interest)) and through consent decrees (see Nat’l Fed. of the Blind and United States v. HRB Digital LLC and HRB Tax Group, Inc., No. 1:13-cv-10799-GAO (decree governing the accessibility of H&R Block’s website); Settlement Agreement Between United States and Ahold U.S.A. Inc. and Peapod LLC.)

These issues  are ripe for action in 2017.  Owners of websites of all stripes should be on the look-out.

Share this:
Facebooktwitterlinkedin

Good Vibrations

** Class Plaintiff not Feeling Data Collection Practices of Intimate Personal Consumer Products Maker **                                                                                                                                                                                                                                                                                              _

Digital Data Privacy Protection Searching Concept

In the “You Can’t Make This Stuff Up” file is the putative class action filed on September 2, 2016 against Standard Innovation (U.S.) Corp. in the U.S. District Court for the Northern District of Illinois.  N.P. v. Standard Innovation (US) Corp. d/b/a We-Vibe, Case No. 1:16-cv-08655, (N.D. Ill. Sept. 2, 2016). According to the complaint, Standard Innovation “is a ‘sensual lifestyle products’ company that sells a high-end vibrator called the We-Vibe.”  The We-Vibe distinguishes itself from its competitors in the marketplace by its smart phone application – “We-Connect,” which can be downloaded from Apple App and Google Play stores.  Why would one care to download such an application?  According to the complaint, “With We-Connect, users can ‘pair’ their smartphone to the We-Vibe, allowing them — and their partners — remote control over the vibrator’s customizable settings and features” – bringing a whole new meaning to the phrase, “phone sex.”  For those who like to teeter on the cutting edge, this technology is referred to as “teledildonics.”  — Seriously.

The problem?  According to the complaint, “Unbeknownst to its customers . . . Defendant designed We-Connect to (i) collect and record highly intimate and sensitive data regarding consumers’ personal We-Vibe use, including the date and time of each use and the selected vibration settings, and (ii) transmit such usage data — along with the user’s personal email address—to its servers in Canada.”  While Americans may be jaded to the systematic gathering and exploitation of their personal information by internet companies for marketing purposes, this case asks the question: “Is our choice of the ‘pulse,’ ‘wave,’ ‘echo,’ ‘tide,’ ‘crest,’ ‘bounce,’ ‘surf,’ ‘peak,’ or ‘cha cha cha’ settings of our ‘sensual lifestyle products’ anybody’s business but our own (and our digital partner’s)?”

The complaint alleges causes of action for violation of the federal Wiretap Act, 18 U.S.C. § 2510, et seq.; the Illinois Eavesdropping Statute, 720 ILCS 5/14-1 et seq.; the common law tort of intrusion upon seclusion; and violation of the Illinois Consumer Fraud and Deceptive Business Practice Act,815 ILCS 505/1 et seq.  The eavesdropping claims are premised on the allegation that “Defendant designed and programmed We-Connect to continuously and contemporaneously intercept and monitor the contents of electronic communications that customers send to their We-Vibe devices from their smartphones, such as operational instructions regarding the users’ desired vibration intensity level and desired vibration ‘mode’ or pattern.”  In other words, Standard Innovation intercepts communications between a user’s cell phone and his or her vibrator.  Plaintiff’s consumer fraud claim arises from the “connect lover” feature of We-Connect that allows “partners [to] exchange text messages, engage in video chats, and . . . control a paired We-Vibe device.”  When a device user initiates a We-Connect session, the screen encourages: “Connect and share control of your We-Vibe from anywhere.  Create a secure connection between your smartphones.”  The complaint alleges that this screen lulls the user into a false sense of security and fails to disclose Standard Innovation’s data collection practices.

The collection of personal data transmitted between devices through an application and representations regarding user privacy make this a “sexy” case – and one to watch.

Share this:
Facebooktwitterlinkedin

The New Naturals

** Where are Class Action Claims Against Consumer Food and Personal Product Companies Trending in 2016?**                                                                                                                                                                                                                                                        PrintWe have blogged in the past about some of the “usual suspects” in the consumer class action line-up – particularly for food, beverage, cosmetics and related industries – for example, the “all-natural” case – the “evaporated cane juice” case – and the “handmade” or “craft beer” case.   Trends come and go – as Plaintiffs run out of companies to sue and as companies change their labeling and advertising in response to the litigation risks.

Which begs the question:  Where are the current litigation trends leading?  We have surveyed recent filings to identify some of the tropes and traps that plaintiffs lawyers are currently focusing on:

As we have discussed in the past, the attractiveness of the all-natural class claim lies in the gaps between FDA guidance and labeling law and the vagaries of the reasonable consumer standardThat gap may be closing with the FDA taking comments and perhaps looking to expand its policy on “natural” foods.  As the term “Natural” loses some of its vagueness, the term “healthy” appears to be taking its place – particularly in so far as the term has the required “eye of the beholder” quality necessary to support class action claims (although in some respects the term “healthy” is regulated see e.g.,  21 CFR 101.65(d)(2)) .  For example in  Kaufman v. CVS Caremark Corp., No. 16-1199, 2016 WL 4608131, at *1 (1st Cir. Sept. 6, 2016) (reversing district court dismissal on Rule 12), CVS Pharmacy, Inc. was sued for its Vitamin E dietary supplement because its label touts the product as supporting “heart health.”  Plaintiff argues that this is misleading because the medical literature does not support a link between consuming vitamin E and cardiovascular health.  Kaufman v. CVS Caremark Corp., No. CV 14-216-ML, 2016 WL 347324, at *1 (D.R.I. Dkt. No. 1 at 7) (and in some studies cited by Plaintiff – Vitamin E dosage increases the rate of heart failure).  In Hunter v. Nature’s Way Prod., LLC, No. 16CV532-WQH-BLM, 2016 WL 4262188, at *1 (S.D. Cal. Aug. 12, 2016) (denying motion to dismiss), Plaintiff alleges that Nature’s Way’s coconut oil is advertised with various health claims (such as its “Variety of Healthy Uses”, “ideal for exercise & weight loss programs”, “fuel a[] healthy lifestyle”), but according to Plaintiff, coconut oil products are not “healthy” . . . “but rather their consumption causes increased risk of CHD, stroke, and other morbidity.” (Dkt. No. 1-5 Compl. at ¶ 118).  In Campbell v. Campbell Soup Co., No 3:16-cv-01005 (S.D. Cal. August 8, 2016) (Dkt 18) (Def. Mot. to Dismiss), Campbell’s Soup Co is defending against Plaintiff’s claims that its Healthy Request® soups are not “healthy” because they contains partially hydrogenated oil (PHO).  Notably, Campbell’s soups are somewhat unique from other food labelling cases because they contain more than 2% meat or poultry and therefore are USDA regulated (see 21 U.S.C. § 451, et seq.) and their labelling is pre-approved (see 21 U.S.C. § 457; accord 21 U.S.C. § 607).  Campbell’s has doubled-down on that argument – moving for Rule 11 sanctions.  No 3:16-cv-01005 (S.D. Cal. August 29, 2016) (Dkt 18).  In Lanovaz v. Twinings N. Am., Inc., No. 5:12-CV-02646-RMW (N.D. Cal. September 6, 2016) (dismissing remaining claims), Twinings successfully defended against claims that the labeling of its tea as a “healthy tea drinking experience” and having “antioxidant” benefits were misleading.  In particular Plaintiff claimed that Twinings’ health benefits could not be substantiated and  were contrary to FDA regulations.  No. 5:12-CV-02646-RMW (N.D. Cal. Dkt. Nos. 1, 24).  It appears that “Healthy” is the new “Natural.”

Plaintiff’s lawyers are also taking a close look at ingredients – to determine if touted anchor ingredients are prominent enough.  For example in Coe v. Gen. Mills, Inc., No. 15-CV-05112-TEH, 2016 WL 4208287, at *1 (N.D. Cal. Aug. 10, 2016) (Order denying Mot. to Dismiss), Plaintiffs argued (successfully at the pleading stage) that General MillsCheerios Protein product labeling is misleading because it implies that the product is essentially the same as normal Cheerios but with added protein.  While Plaintiffs acknowledge that Cheerios Protein does have more protein than regular Cheerios (Plaintiffs calculate that 200 calories of Cheerios contains 6 grams of protein, whereas 200 grams of Cheerios Protein contains 6.4 or 6.7 grams of protein), they argue that this smidgen of an increase is so immaterial as to be misleading.  In another example, in Nazari v. Gen. Mills, Inc., No. 2:16-cv-02015 (E.D. Cal. Aug. 23, 2016), the Plaintiff sued Target with a proposed class action alleging the retailer’s up & up™ Green Aloe Vera Gel lacks traces of Aloe Vera.  Plaintiff alleges that while the product is labelled as an “aloe vera gel” with “pure aloe vera,” its laboratory testing (which it contends would have revealed acemannan, the key compound in aloe vera) could detect no active aloe ingredient.  In another example, in Torrent v. Thierry Oliver., No. 2:15-cv-02511 (C.D. Cal. Sept. 2, 2016) (denying motion to dismiss), Plaintiff survived dismissal on claims that Natierra brand Himalania Goji berries are misleadingly labeled because they are not berries from the Himalayan mountain region in China – which was inferred by the “Himalania” brand name.  In labelling, as in everything else, attention to detail counts.

We will update you on these trends as they progress.

Share this:
Facebooktwitterlinkedin

Lawyers Don’t Always Win

** Purported Class of Lawyers Suing for Misappropriation of Image and Likeness Fails at First Hurdle  **                                                                                                                                                                                                                                                                                                                                                                                                                       crsfkvk5jmarrd3ls7emnw-avvo_logo-color_blue_taglineBucking the popular notion that the legal system protects its own – a recent putative class action in Illinois bought by and for a class of lawyers – failed.  Vrdolyak v. Avvo, Inc., No. 16 C 2833, 2016 WL 4765716, at *1 (N.D. Ill. Sept. 12, 2016).  The defendant in the lawsuit,  Avvo.com, publishes a directory that includes “profile pages” for millions of U.S. attorneys.   Most lawyers, however, have never asked avvo.com to create profile pages for them – let alone had any input into them (or even know they exist) – rather the machine generated profiles are created using data gleaned from public records such as bar admissions and court records.  The generated “profile page” contains identifying information and a rating calculated by an algorithm (which, rather crudely, primarily uses the number of years in practice as its measure).  But some lawyers purchase from avvo.com special “sponsored listings” which promote their avvo.com profile above the unwashed mass.  It appears that avvo.com’s business model relies on its critical mass of (involuntary) profiles and the ability to allow lawyers willing to pay a fee, to appear more prominently (i.e. what Google does!).  Plaintiff John Vrdolyak (a University of Chicago law school graduate) cried foul.  He claimed that his identity (and that of every other involuntarily avvo.com profiled lawyer) was misappropriated for commercial purposes without consent in violation of the Illinois Right of Publicity Act (“IRPA”), 765 ILCS 1075/1 et seq.

The Court sided with avvo.com – agreeing with its argument that the profile pages were speech that is fully protected by the First Amendment.  The court reasoned that what avvo.com does is akin to a yellow pages directory, which receives First Amendment protection.  Dex Media West, Inc. v. City of Seattle, 696 F.3d 952, 962 (9th Cir. 2012) (concluding that publications like yellow pages directories and newspapers receive full First Amendment protection because, as a threshold matter, they do not constitute commercial speech.)  The Court also analogized the avvo.com profiles to those of a magazine, like Sports Illustrated, that publishes non-commercial information (i.e. articles about athletes) and sells and places advertisements within and around that information.  The articles are fully protected non-commercial speech – the advertisements are (less protected) commercial speech.  In this case the “Sponsored Listings” were the commercial speech – but they were authorized and not at issue.  Those profiles that were at issue – the unauthorized profiles – were protected speech and their placement with the sponsored listing did not convert the entire website into commercial speech – the court opined.  Gallingly, the court not only refused to side with the lawyers – but used the Constitution to do so.

Share this:
Facebooktwitterlinkedin

No Pay, No Play

** District Court Rejects Settlement Deal That Extracts a Broad Release of Claims But Provides No Money to Class Members **

Pay writing on Keyboard

It is not common for judges to reject class settlements, usually because lawyers for the opposing sides — putting aside their adversary roles — are savvy enough not to give the judge cause.  That was not the case recently, however, in a long running homeopathic product false advertising case in the Southern District of California.  Allen v. Similasan Corp., No. 12-CV-376-BAS-JLB, 2016 WL 4249914, at *1 (S.D. Cal. Aug. 9, 2016).

The allegations in this case, which are similar to those of other recent homeopathy cases (see e.g., Nat’l Council Against Health Fraud v. King Bio Pharms., 107 Cal. App. 4th 1336, 1348 (2003); Herazo v. Whole Foods Mkt., Inc., No. 14-61909-CIV, 2015 WL 4514510, at *1 (S.D. Fla. July 24, 2015); Conrad v. Boiron, Inc., No. 13 C 7903, 2015 WL 7008136, at *1 (N.D. Ill. Nov. 12, 2015)) complain that Similasan engaged in false advertising by omission by not including on its products’ labels statements to the effect that (i) the product was not FDA approved as medically effective and (ii) the active ingredients were diluted.  Notably, neither of those disclaimers is required on homeopathic products – but even so, many companies voluntarily include them.

In Similasan, after four years of hard fought litigation  the Defendant had successfully narrowed the claims by summary judgment [Dkt. No. 142] and Plaintiffs had certified  a class [Dkt. No. 143].  Similasan, however, filed a motion to decertify, arguing that Plaintiffs would not be able to prove materiality or falsity with their expert witnesses’ survey evidence [Dkt. No. 164].  With the motion to decertify pending, the parties settled and sought judicial approval of their agreement [Dkt. No. 196].  But the settlement was not a cure the district court could swallow.  Judge Bashant noted her role in the fairness hearing was to look for “subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations.” (2016 WL 4249914, at *3 citing In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir.2011)).  In this case, the signs were not subtle, and it was not a close call for the Court to deny approval.

In particular, Judge Bashant took exception to the following features of the proposed agreement:

  • The remedy for the unnamed class was injunctive relief only. While the company agreed to add the disclaimers that Plaintiffs’ counsel had complained were omitted, Similasan was not required to compensate class members;
  • The only money went to the class representatives who would pocket $2,500.00 each and Plaintiff’s counsel who secured a clear-sailing agreement which would permit an award of fees in excess of $550,000.00;
  • In exchange for injunctive relief, class members released Similasan from all claims identified in the complaint;
  • The release covered a nationwide class even though the Court had certified a California class only.

These settlement terms were not good enough for the Court.  The class was being asked to give up the right to sue but receiving nothing in return.  Indeed, to the extent the remedy was an injunction, a class member who opted out would receive the same benefit without forfeiting any rights.  Tellingly, eight State Attorneys General (Arizona, Arkansas, Louisiana, Michigan, Nebraska, Nevada, Texas and Wyoming) filed an amicus curiae brief urging the Court to reject the proposed settlement. [Dkt. No. 219].

The Court also discussed the role that notice (or lack thereof) played in its decision making.  The Court observed that the proposed class would have been in the tens of thousands [Dkt. No. 216], but the settlement notice prompted only 136 views of the settlement information website and 21 phone calls to the settlement hotline.  The Court attributed this lackluster response to the weakness of the notice, which consisted of a single ad in USA Today and some incidental online placements.  But the reality is the paucity of the economic return (i.e. zero) likely resulted in mass indifference.

 

Share this:
Facebooktwitterlinkedin

Uber Investigated for Investigating

** Uber Sanctioned for Their Tactics in Consumer Class Action Case **                                                                                                                                                                                                                                  

San Francisco, USA - May 12, 2016: Uber headquarters entrance in San Francisco with sign on the right. A woman is leaving the building through the front door. Reflections of Market street in the window.

Some interesting detours have developed in the Uber anti-trust consumer class action in the Southern District of New York (Meyer v. Kalanick, No. 1:15-cv-09796-JSR (S.D.N.Y December 12, 2015)).

The first is that the case was actually not bought against Uber, but against its CEO Travis Kalanick, possibly in order to avoid an arbitration clause in the Uber User Agreement.  Uber was successful in joining the corporation as a necessary party (Meyer v. Kalanick, No. 15 CIV. 9796, 2016 WL 3509496, at *3 (S.D.N.Y. June 20, 2016)). The court heard argument on whether the joinder case should be subject to the Uber arbitration agreement on July 14, 2016 (Dkt. No. 91).

The second detour – and not one you’d expect – Uber and its lawyers (and the private investigative firm Ergo hired by the legal team) are accused of fraudulent conduct during their informal investigation of opposing counsel and opposing parties.  Plaintiff’s counsel began to get suspicious when his friends, colleagues and acquaintances started receiving phone calls in which, it was alleged, false statements were made that the caller was compiling a profile of up-and-coming labor lawyers in the United States.  Meyer v. Kalanick, No. 15 CIV. 9796, 2016 WL 3189961, at *1 (S.D.N.Y. June 7, 2016).  Similar phone calls were allegedly made regarding the putative class representative – purportedly profiling his work as an environmental conservationist.  Plaintiff’s counsel confronted Defense counsel about these suspicious calls – and they initially responded by denying any involvement, then backtracked and admitted they had hired Ergo (but asserted that Uber or counsel did not direct Ergo to make any misrepresentations).  Id.  This was enough for the court to order discovery on what Uber and its lawyers knew and did – taking the extraordinary step of allowing depositions of Uber’s in-house legal director and Ergo over Uber’s privilege objections.  Id. at *2.  The court also ordered legal communications be turned over for in-camera review to determine if defense counsel was involved in the alleged fraud.  Id. at *3.  Following the Ergo discovery, Plaintiff’s counsel moved for sanctions under Rule 37 (Dkt. No. 103) arguing that Uber was at best reckless in its oversight of the investigation – and at worst part of the fraud.  Id. at 11.

Judge Rakoff ruled on the sanctions motion on July 29, 2016.  Meyer v. Kalanick, No. 15 CIV. 9796, 2016 WL 3981369, at *1 (S.D.N.Y. July 25, 2016).  Judge Rakoff began his opinion and order with this salvo: “It is a sad day when, in response to the filing of a commercial lawsuit, a corporate defendant feels compelled to hire unlicensed private investigators to conduct secret personal background investigations of both the plaintiff and his counsel. It is sadder yet when these investigators flagrantly lie to friends and acquaintances of the plaintiff and his counsel in an (ultimately unsuccessful) attempt to obtain derogatory information about them.”  Id.  Judge Rakoff noted that Uber claimed work-product privilege over relevant material – but at the same time – argued that the purpose of the investigation was not to secure derogatory information about Plaintiff and Plaintiff’s counsel (but merely to determine if there was a security threat to Uber personnel).  Id. at *4.  The court noted that Uber could not have its cake and eat it too.  If Uber wanted to allege that the purpose of the investigation was security–focused, then it was not in anticipation of litigation and the privilege did not apply.  As to the investigative methods employed by Ergo, Judge Rakoff was scathing.  He characterized lying to the target witnesses about the nature and intent of the calls as inherently fraudulent – and materially so.  Id. at *6.  He rejected the argument that a party to litigation may properly make misrepresentations in order to advance its own interests vis-a-vis its legal adversaries.  Id. at * 7.  The court further observed that Uber’s in-house and external counsel are bound by the New York Rules of Professional Conduct to adequately supervise non-lawyers retained to do work in order to ensure that the non-lawyers do not engage in actions that would be a violation of the Rules if a lawyer performed them.  Id. (citing N.Y. Rules of Professional Conduct § 5.3).  Judge Rakoff was also scornful of Ergo for not licensing in New York as a private investigative firm and for recording calls with targets located in states (Connecticut and New Hampshire, for example) where unilateral recording of conversations is illegal.  Id. at *8.  Judge Rakoff enjoined the Uber defendants from using any of the information obtained through Ergo’s investigation in any manner, including by presenting arguments or seeking discovery concerning the same and enjoined both Uber and Ergo from undertaking any further personal background investigations of individuals involved in the litigation.  Id.  The court noted that the parties had already come to a confidential agreement as to the payment by Uber of Plaintiff’s fees in bringing the motion.  Id.

Uber’s litigation detour provides some valuable insights into how judges will likely treat “enhanced investigation techniques” during formal discovery – and further proves the maxim that it is not the original scandal that gets people in the most trouble – it’s the attempted cover-up.

 

Share this:
Facebooktwitterlinkedin

Fair in Love and War?

** Popular Match Making App Tinder Loses on Second Bite To Defeat Gender-Bias Class Action **                                                                                                                                                                               

Antalya, Turkey - February 02, 2016 : A close up of an Apple iPhone 6s Plus screen showing various dating apps, including happn, Tinder, The Grade, POF, Badoo, Glint, LOVOO, eHarmony, OkCupid

The popular geo-location dating application Tinder was rebuffed in its latest attempt to have a putative California class action complaint against it dismissed.  Manapol. v. Tinder, No. BC589036, (Sup. Ct. L.A. County) (filed April 28, 2015).  The complaint alleges that Tinder illegally discriminated against Plaintiff by charging him more than a similarly situated woman (for the Tinder Plus service) and therefore violated California’s Unruh Civil Rights Act.  Id.   Earlier this year, Plaintiff’s initial complaint was dismissed without prejudice for his failure to “connect the dots” on the facts.  Id. (Order and Opinion, Feb. 17, 2016).  The court held that Plaintiff’s complaint was built on his naked (pun intended) allegation that a female friend’s Tinder Plus bill was lower than his, which, (even if were true) was merely an isolated event and, therefore, insufficient to show a pattern of price discrimination based on gender.  Plaintiff returned with an amended complaint alleging that the disparate pricing he experienced was not a one-off occurrence – but embedded in the algorithms at the heart of the functionality of Tinder Plus.

Superior Court Judge William F. Highberger rejected Tinder’s demurrer to this amended complaint, holding that Plaintiff’s allegations were adequately pled.  Id. (Order and Opinion, July 21, 2016).  In an oral argument (which we would have paid money to attend), the parties went back and forth with Judge Highberger over whether Tinder engages in gender discrimination with Tinder offering the declaration of a company employee that Tinder does not discriminate in its pricing for Tinder Plus or the number of free swipes a user gets on Tinder – and Plaintiff asserting he has his own contrary facts and will be able to obtain more evidence from Tinder.  Clearly, a fight is brewing over the discoverability of Tinder’s trade secret algorithms.

The most surprising thing about this lawsuit for those who are unversed in California’s Unruh Civil Rights Act is that, even accepting the allegations as true, the complaint states a claim.  Long before Ronald Bell of Kool & the Gang penned his immortal 1979 ballad (best performed by Jon Lovitz in the Wedding Singer), of the same name, “Ladies Night” was a ubiquitous part of American nightlife.  But ironically, at about the same time the song reached its zenith at #8 on the Billboard Hot 100, a gentleman by the name of Dennis Koire was visiting Orange County car washes asking for the advertised “Ladies’ Day” discount and the Jezebel Nightclub in Anaheim demanding the “Ladies’ Night” reduced admission, all to no avail.  The lawsuit he filed made it to the California Supreme Court in 1985, where the Court put the kibosh on Ladies Night in Koire v. Metro Car Wash, 40 Cal.3d 24 (1985), holding that such discounts violate the Unruh Act’s requirement that “[a]ll persons within the jurisdiction of this state are free and equal, and no matter what their sex . . .  are entitled to the full and equal accommodations, advantages, facilities, privileges, or services in all business establishments of every kind whatsoever . . . .”  Cal. Civil Code §51.  Jezebel’s owner argued that the “social policy” exception applied in other Unruh Act cases was warranted in his case because “’Ladies Night’ encourages more women to attend the bar, thereby promoting more interaction between the sexes.”  Koire, 40 Cal.3d at 33.  The Court found this argument “not sufficiently compelling.”  Id.   Although such an argument is not likely to assist Tinder — if in fact it does gender discriminate as Plaintiff alleges — the California Supreme Court might want to reconsider its rejection of Jezebel’s social policy argument.  In a world of millennials (and seniors!) looking for love on their laptop screens, there may be social utility in encouraging live interaction between Californians.

 

Share this:
Facebooktwitterlinkedin