Consumer Class Action

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

MillerCoors Over the Moon

** Brewer prevails against Blue Moon “Craft Beer” false advertising suit **

Craft beers in different bottles.

We’ve blogged in the past about the raft of consumer class actions hitting beer and spirits makers – particularly lawsuits targeting manufacturers with claims that terms such as “handcrafted” or “handmade” are misleading if used by companies employing typical mass-production methods.  For example in Parent v. MillerCoors LLC., No. 15-cv-01204-GPC-WVG (S.D. Cal. May 30, 2015), MillerCoors – maker of that campus staple, Keystone Light (among a host of other brews) — was sued based on the premise that it’s Blue Moon beer misleads consumers into believing it is a “microbrew” or “craft beer” by using those terms in its advertising and by withholding the name “MillerCoors” from its label.

On October 26, 2015, the court granted MillerCoor’s  first motion to dismiss.  Dkt No. 17.

The court found that a reasonable consumer was not likely to be deceived by Defendant’s representations because MillerCoors’ use of the “Artfully Crafted” trademark was mere puffery.  Id. at 12–16.  The court also rejected Plaintiff’s argument that Blue Moon’s “placement among other craft beers” in retail stores was deceptive because Plaintiff did not allege, and provided no factual allegations from which the court could reasonably infer, that MillerCoors had any control over where retailers place Blue Moon on their shelves.  Id.  Plaintiff was given leave to amend, however, which he did, focusing his amended argument on the definition of “craft beer” set forth by the Brewer’s Association (and in various common dictionaries) providing that a “craft beer” connotes a beer made by traditional or non-mechanized means.  Dkt No. 19.  Plaintiff also alleged that the price differential between Blue Moon and comparable non-craft beers was, itself, a representation that the beer was superior.

The court rejected these arguments and dismissed the second amended complaint — this time with prejudice.  Parent v. Millercoors LLC, No. 3:15-CV-1204-GPC-WVG, 2016 WL 3348818, at *6 (S.D. Cal. June 16, 2016).  Again, the court considered MillerCoors’ Blue Moon advertising, as far as it pertains to representations about “craft beer,” as non-actionable puffery.  Id. ([T]he “advertisements contain ‘generalized, vague, and unspecified assertions’ that amount to ‘mere puffery upon which a reasonable consumer could not rely.’”)  Further, the court rejected Plaintiff’s argument that the price of a product can constitute a representation or statement of product quality.  Id. (citing Boris v. Wal-Mart Stores, Inc., 35 F. Supp. 3d 1163, 1169 (C.D. Cal. 2014) (finding that the price of a migraine medication did not constitute a representation or statement about the product that could support consumer claims against a retailer under the UCL, CLRA, or FAL)).

Our takeaway:  Drink what you like.  Beer snobbery will get you nowhere.

 

Share this:
Facebooktwitterlinkedin

Turning Tide on the Whole Nation as a Viable Class?

** Is the All State Nationwide Class Back for False Advertising Plaintiffs?**                                                                                                                                                                                                                                     

Abstract map of the United States of America covered by a social network composed of blue people symbols connected together at various sizes and depths on a white background with pixelated borders. Futuristic north american computer and social network background.

Class defense counsel, faced with a false advertising law suit seeking to certify a class of consumers across multiple states, often rely on Mazza v. Am. Honda Motor Co., 666 F.3d 581 (9th Cir. 2012) as impenetrable authority for the proposition that material differences between various state consumer protection laws preclude one single court from certifying a nationwide consumer class.  Mazza was a defining “stay in your lane” case for consumer class actions – but are chinks in the armor showing?

In Mazza, defendant Honda on appeal from the lower court, which certified a class of Acura RL buyers who complained of a faulty collision-mitigation braking system, successfully argued at the Ninth Circuit that several material differences between California consumer-protection laws and those of other jurisdictions at issue precluded certification of a nationwide class.  666 F.3d at 591.  Some states, for example, require plaintiffs to demonstrate scienter and/or reliance, while others do not.  Id. Similarly, some state’s consumer laws have no private right of action.  Id.  And significant differences exist in the remedies available to plaintiffs under the various state laws.  Id.  Because prevailing choice-of-law analysis required that home-state law should govern each class member’s claim, the court vacated the class-certification order.  Id.

Many trial courts – not just those in the Ninth Circuit – have followed the Mazza court’s reasoning and denied nationwide class certification where material differences in state laws were identified – even at the pleading stage. Gianino v. Alacer Corp., 846 F. Supp. 2d 1096 (C.D. Cal. 2012); Frezza v. Google Inc., 2013 WL 1736788 (N.D. Cal. Apr. 22, 2013) (precluding North Carolina plaintiffs from asserting claims under California law, given that the transaction at issue took place in North Carolina); Ralston v. Mortgage Investors Group, Inc., 2012 WL 1094633 (N.D. Cal. Mar. 30, 2012) (out of state adjustable-rate mortgage holders could not rely on California UCL); Maniscalo v. Brother International (USA) Corp., 709 F.3d 202 (3d Cir. 2013) (New Jersey law does not apply to South Carolina consumers); Garland v. Servicelink L.P., No. GLR–13–1472, 2013 WL 5428716 (D. Md. 2013) (Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) does not apply to Maryland residents);  In re Celexa & Lexapro Mktg. & Sales Practices Litig., 291 F.R.D. 13 (D. Mass. 2013) (nationwide class of prescription anti-depressant drugs buyers could not be certified); Harris v. CVS Pharm., Inc., CV 13–02329 AB (AGRx), 2015 WL 4694047, at *4–5 (C.D. Cal. Aug. 6, 2015) (California plaintiff who purchased products in California lacked standing to bring a claim under a Rhode Island statute); Davison v. Kia Motors Am., Inc., No. SACV 15-00239-CJC, 2015 WL 3970502, at *2 (C.D. Cal. June 29, 2015) (denying nationwide certification on behalf of Kia Optima owners whose vehicle had allegedly defective electronic door locks).

But more recently, judges are taking a second look at Mazza.  Judge Gillan in the Northern District of California recently stated that reading a “bright line rule” into Mazza “significantly overreads” the case.  Valencia v. Volkswagen Grp. of Am. Inc., No. 15-CV-00887-HSG, 2015 WL 4760707, at *1 (N.D. Cal. Aug. 11, 2015).  Rather, he stated, Mazza’s application should be limited to its choice-of-law analysis and its determination that California law should not be applied to non-California residents, rather than a wholesale edict that nationwide classes are, as a matter of law, un-certifiable.  Id. citing Forcellati v. Hyland’s Inc., 876 F.Supp.2d 1155, 1159 (C.D.Cal.2012).  And rather than the choice of law analysis being performed at the pleading stage on a motion to dismiss, Judge Gillan held that this factual inquiry is more appropriately addressed at the class certification stage.  Id. citing In re Clorox Consumer Litigation, 894 F.Supp.2d 1224, 1237 (N.D.Cal.2012) (“Since the parties have yet to develop a factual record, it is unclear whether applying different state consumer protection statutes could have a material impact on the viability of Plaintiffs’ claims”).

Last week, the court in Kaatz v Hyland’s Inc., No. 7:16-cv-00237-VB, (S.D.N.Y July 6, 2016) (Dkt. No. 29) similarly found it premature to deal with concerns about standing to represent consumers in all 50 states at the pleading stage. Judge Briccetti stated he was part of a “growing consensus” of federal district judges who believe standing issues that go to putative class members’ commonality and typicality are better addressed at the class certification stage, rather than on a motion to dismiss.  Dkt. No. 29 at 7 – 8, citing In re DDAVP Indirect Purchaser Antitrust Litig., 903 F. Supp. 2d 198, 214 (S.D.N.Y. 2012).  The Kaatz case, itself, dealt with two New York residents who claimed they were misled by the marketing and labeling for Hyland’s homeopathic baby products such as Baby Teething Gel and Baby Nighttime Tiny Cold Syrup.  The allegations followed the familiar trope of “natural” claims being misleading, as the product/s allegedly contained synthetic ingredients such as sodium benzoate and potassium sorbate, which are used as food preservatives.  They accused Hyland of violating all 50 states’ consumer protection laws and sought to certify a nationwide class.  Plaintiffs argued that even though they were all New York residents, the questions of common issues and manageability of the proposed nationwide class were better left for the class certification stage.  Judge Briccetti agreed, holding that Hyland’s arguments were “premature” at the motion to dismiss stage – finding that “class certification is logically antecedent to standing when, as here, class certification is the source of the potential standing problems.”  Id.

Share this:
Facebooktwitterlinkedin

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.

Share this:
Facebooktwitterlinkedin

Ice Ice (Baby)

** Purported Class Action Attempts to Sink Starbucks with claims over allegedly misleadingly frozen water **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         

danger thin ice - warning sign by a lake

Last week, a disgruntled Starbucks patron in Chicago filed a putative class action against the coffee icon in the Northern District of Illinois claiming that consumers like her have been defrauded over the past ten years by big plastic cups of ice.  Pincus v. Starbucks Corporation, 1:16-cv-04705 (N.D. Ill. April 27, 2016) (Dkt. No. 1).  Granted, all of the drinks that are part of the lawsuit are called “Iced Something-Or-Other,” but according to the Plaintiff that doesn’t justify Starbucks putting ice in the beverages.  Okay, that’s overstating it a bit.

The lawsuit hinges on Starbucks’ use of the acronym for fluid ounce (“fl. oz.”) on its menus and in other advertising.  Plaintiff contends that “fl. oz.” means just that – an ounce of fluid – and the actual fluid ounces in Starbucks iced drinks are less than those claimed in its advertising.  It is only by putting pre-measured scoops of ice in the drinks that the nefarious Starbucks baristas are able to completely fill those ubiquitous transparent cups.  Starbucks, of course, is behind the whole scheme supplying the baristas with beverage cups with fill-lines printed on them (product/water or lemonade/ice) as well as different size ice scoopers (Tall/Grande/Venti).  Plaintiff claims that she, and millions of other Starbucks aficionados across the United States, relied on the Company’s representations about the number of fluid ounces in their drinks and “Plaintiff would not have paid as much, if anything for the Cold Drinks had she known that it [sic] contained less, and in many cases, nearly half as many, fluid ounces than claimed by Starbucks.”

“Ounce” is Middle English from the Anglo-French “unce” and is a unit of mass equal to 1/16 of an avoirdupois pound and 1/12 of the troy pound favored by precious metal dealers.  More importantly, an ounce is 0.666682 of a jigger of Jim Beam.  Accordingly, any class certified in this case must certainly exclude gold investors and may need to be limited to hard core drinkers who know what an ounce looks (and feels) like.  But while the public may have some difficulty visually identifying an ounce, they certainly know the difference between a Grande and a Venti, which is, after all, what they’re buying.

Plaintiff’s class definition is “[a]ll persons in the United States of America who purchased one or more of Defendant’s Cold Drinks at any time between April 27, 2006 and the present.”  “Cold Drinks”  include, but are not limited to, “iced coffee, shaken iced tea, shaken iced tea lemonade, Refreshers®, and Fizzio™ handcrafted sodas” (which, as an aside, are sadly not available at all Starbucks locations – but for those in the right locale, our pro tip is the Golden Ginger Ale).  Although both cold and a drink, the Frappuccino® is not included.  And that’s the whole problem with this case, isn’t it?

The Frappuccino® contains plenty of ice.  But because the ice is blended with the flavored ingredients, it apparently qualifies as a liquid even though it’s really tiny shards of ice.  Which raises the questions:  If the ice melts in a Starbucks Iced Coffee before the purchaser finishes drinking it, is the purchaser getting the advertised number of fluid ounces?  What if the purchaser is an ice chomper?  Plaintiff’s complaint shrewdly anticipates these defenses.  First, Starbucks uses “large pieces of ice” that “take up more space and thus when melted, will yield fewer measured ‘fluid’ ounces of coffee or tea . . . .”  (Starbucks is skimping on the water!)  More broadly, Plaintiff declares that “a reasonable consumer does not wait for the ice in a Cold Drink to melt before consuming the Cold Drink.”  This point, of course, will require survey evidence to establish — or perhaps the class can be limited to purchasers of Starbucks Cold Beverages who are not sippers or chompers.  (Ascertainability might be a problem here.)

Starbucks suffers from its transparency (which is the opposite of the problem it faced in a now dismissed slack fill case against it filed in New York).  Anyone who purchases an iced beverage for the first time – particularly a shaken iced tea, a Refresher® or a Fizzio™  – is startled when the barista pours such a small amount of the flavored stuff in the bottom of one of those big plastic cups and then tops it off with water (or lemonade) and finally, a huge mound of ice.  A Diet Coke from the McDonald’s drive-thru window retains its mystery.  How much syrup?  How much ice?  But for those who love Starbucks, the beverages are consistently great – a treat to be savored slowly . . . while the triple-filtered ice melts.

Share this:
Facebooktwitterlinkedin

Class Actions And Taxes in New Jersey

** “In this world nothing can be said to be certain, except class actions and taxes.” – (paraphrasing) Ben Franklin **

HiResWhile tax season is now behind most of us, things are just starting to heat up for Intuit, Inc., owner of one of the largest online tax preparation systems – TurboTax.  On April 12, 2016, Intuit was sued in a putative class action in the U.S. District Court for the District of New Jersey over warranty and damage limitations in TurboTax’s Terms of ServiceRubin v. Intuit Inc., Case No. 3:16-CV-02029 (Dist. N.J. April 12, 2016) (Dkt. No. 1).  The claim is made under New Jersey’s  Truth in Consumer Contract, Warranty and Notice Act (“TCCWNA”), N.J.S.A 56:12-14 et seq.  Due, perhaps, to its difficult-to-remember acronym, the TCCWNA gathered dust on the shelves of plaintiff consumer lawyers for the first thirty years of its existence.  This is surprising given that the TCCWNA has two significant advantages over New Jersey’  other consumer statute, The Consumer Fraud Act (“CFA”), N.J.S.A. 56:8-1 et seq.:  (1) The TCCWNA provides for a minimum of $100 statutory damages per consumer (N.J.S.A. 56:12-17) and (2)  The TCCWNA doesn’t require putative class members to have actually purchased anything.  N.J.S.A. 56:12-15 (TCCWNA applies to “consumer[s] or prospective consumer[s]”).  .

Which brings us to TurboTax.  Intuit has a fairly standard Terms of Service page on its website that users must agree to – terms of service that are particularly apropos for a company whose principal service results in the filing of income tax returns under penalty of perjury by consumers who tend to wait until the last minute to perform this painful task with varying degrees of care.  These terms include an acknowledgement by the user that “THE SITE IS PROVIDED ‘AS IS,’ WITHOUT ANY WARRANTY OF ANY KIND, EITHER EXPRESS OR IMPLIED” as well as an agreement that “DIRECT, INDIRECT, INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES” are prohibited.  Of course, TurboTax’s terms also provide that, where the laws of particular states do not permit Intuit to limit its liability in certain ways, those limitations do not apply to users in those states, but otherwise, “THE . . . LIABILITY OF INTUIT . . . IS LIMITED TO THE GREATEST EXTENT PERMITTED BY SUCH STATE LAW.”

How can such common provisions in website terms of use result in liability under New Jersey law?  Enter the TCCWNA, which provides, “No seller . . . shall in the course of his business offer to any consumer or prospective consumer or enter into any written consumer contract or give or display any written consumer warranty, notice or sign . . . which includes any provision that violates any clearly established legal right of a consumer . . . established by State or Federal law.”  N.J.S.A 56:12-15.  In Rubin, the plaintiffs contend that Intuit’s standard warranty limitations violate New Jersey common law and State and Federal statutes, including New Jersey’s Products Liability Act, its Punitive Damages Act, and the Uniform Commercial Code.

“But wait!” you say.  What about Intuit’s statement in the TurboTax Terms of Service that the damages limitations are void where prohibited?  Ironically, according to the plaintiffs, that provision is not only not exculpatory – it’s actually a separate violation of the TCCWNA.  The New Jersey statute provides, “No consumer contract, notice or sign shall state that any of its provisions is or may be void, unenforceable or inapplicable in some jurisdictions without specifying which provisions are or are not void, unenforceable or inapplicable within the State of New Jersey; provided, however, that this shall not apply to warranties.”  N.J.S.A. 56:12-16.  Even when a company tries to comply with state statutes, it may be violating New Jersey’s TCCWNA.

It will be interesting to see whether the U.S. Supreme Court’s anticipated decision in Spokeo, Inc. v. Robbins, No. 13-1339, cert. granted (U.S. April 27, 2015) will have an impact on the progress of TCCWNA cases.  In Spokeo, the Supreme Court is mulling over whether a plaintiff/class representative has standing to assert claims based upon the violation of federal statutes – in that case the Fair Credit Reporting Act – where the plaintiff has not been injured.  If the Court determines that there is no standing if there is no injury, that reasoning may have some applicability to the TCCWNA, which does not require the plaintiff to have even used the service or purchased the product.  In addition, it’s an open question as to whether “prospective consumers” can be included in a putative TCCWNA — at least in federal court in the Third Circuit — under the circuit’s ascertainability requirement:  Can there be “a reliable and administratively feasible mechanism for determining whether putative class members fall within the class definition” [Carrera v. Bayer Corp., 727 F.3d 300, 355 (3d Cir. 2013)],where the class consists of anybody who laid eyes on a website’s terms of use?  But for the forseeable future, ecommerce companies should closely review their terms of use to ensure that they do not run afoul of the TCCWNA.

Share this:
Facebooktwitterlinkedin

Is the Primary Jurisdiction Doctrine Alive Again for “Natural” Defendants?

 ** Ninth Circuit Stays Natural Case In “Food Court” **
maxresdefault

The doctrine of primary jurisdiction is a prudential means to stay or dismiss a party’s claims if the claims are better adjudicated or answered by an administrative agency – it “is concerned with promoting proper relationships between the courts and administrative agencies charged with particular regulatory duties.” Ellis v. Tribune Television Co., 443 F.3d 71, 81 (2d Cir.2006). It is properly applied “whenever enforcement of the claim requires the resolution of issues which, under a regulatory scheme, have been placed within the special competence of an administrative body.” Id. When applicable, “a court defers to the agency for advisory findings and either stays the pending action or dismisses it without prejudice” Johnson v. Nyack Hosp., 86 F.3d 8, 11 (2d Cir.1996).

Courts must make a case-by-case determination when considering primary jurisdiction.   In doing so, they generally focus on: (1) whether the question at issue is within the conventional experience of judges or whether it involves technical or policy considerations within the agency’s particular field of expertise; (2) whether the question at issue is particularly within the agency’s discretion; (3) whether there exists a substantial danger of inconsistent rulings; and (4) whether a prior application to the agency has been made. Nat’l Commc’ns Ass’n v. AT & T, 46 F.3d 220, 222 (2d Cir.1995).

There was a time when “primary jurisdiction” was in vogue for “all natural” defendants because of the perception that the FDA was the proper administrative body to answer the question of what sort of ingredients and products qualify as “natural.”  The leading case was Astiana v. Hain Celestial Grp., Inc., 905 F. Supp. 2d 1013 (N.D. Cal. 2012). This case involved Hain Celestial’s cosmetics products with labels including “All Natural,” “Pure Natural,” or “Pure, Natural & Organic.” In this case, the putative nationwide class representatives alleged that they had been duped into purchasing Hain’s cosmetics that allegedly contained synthetic and artificial ingredients such as benzyl alcohol.  As is typical in such cases, the plaintiffs sought damages and injunctive relief under a variety of theories including statutory violations under the California’s Consumer Legal Remedies Act. The district court dismissed the case, applying primary jurisdiction, holding that “[in] the absence of any FDA rules or regulations (or even informal policy statements) regarding the use of the word “natural” on cosmetics labels, the court declines to make any independent determination of whether defendants’ use of “natural” was false or misleading. Doing so would “risk undercutting the FDA’s expert judgments and authority.” Other district courts invoked the agency’s primary jurisdiction to wait and see if the FDA intended to offer  regulations regarding the use of the term “natural” (in particular in GMO food cases). In re Gen. Mills, Inc. Kix Cereal Litig., No. CIV–A–12–249 KM, 2013 WL 5943972 (D.N.J. Nov. 1, 2013), Barnes v. Campbell Soup Co., No. C12–05185 JSW, 2013 WL 5530017 (N.D.Cal. July 25, 2013) (GMO food case), Cox v. Gruma Corp., No. 12–CV–6502 YGR, 2013 WL 3828800 (N.D.Cal. July 11, 2013) (GMO case).

Undeterred by the district court’s dismissal, the Plaintiffs in Astiana went on a two pronged attack. They went directly to the FDA seeking guidance on the definition of “natural.”  The FDA responded by letter stating – “cosmetic public health and safety matters are currently fully occupying the resources that FDA has available for proceedings on cosmetics matters” and “proceedings to define ‘natural’ do not fit within [the agency’s] current health and safety priorities.” Plaintiffs also appealed to the Ninth Circuit.  Astiana v. Hain Celestial Grp., Inc., 783 F.3d 753, 759 (9th Cir. 2015). The Ninth Circuit held that — while the district’s court primary jurisdiction doctrine decision was not wrong — it should have stayed the matter awaiting an FDA response. Upon remand, the district court revisited the primary jurisdiction argument and, recognizing that the recent FDA letter demonstrated that the FDA has no interest in the subject matter and, therefore,  referral to the FDA would be futile, the court denied defendant’s motion to stay on primary jurisdiction grounds. Astiana v. Hain Celestial Grp., Inc., No. 4:11-cv-06342-PJH (N.D. Cal. October 9, 2015) (Dkt. No. 114).

Courts in other jurisdictions have followed this same rejection of the primary jurisdiction doctrine argument made by cosmetic company defendants in “natural” cases. Goldemberg v. Johnson & Johnson Consumer Companies, Inc., 8 F. Supp. 3d 467, 476 (S.D.N.Y. 2014) (“the FDA has not begun to promulgate a rule concerning the term natural in cosmetics . . [i]nstead, it recently declined to make such a determination . . . [t]hus, as the agency is not simultaneously contemplating the same issue . . . this factor weighs against applying the primary jurisdiction doctrine”); Paulino v. Conopco, Inc., No. 14-CV-5145 JG RML, 2015 WL 4895234, at *1 (E.D.N.Y. Aug. 17, 2015); Langan v. Johnson & Johnson Consumer Companies, Inc., 95 F. Supp. 3d 284, 290 (D. Conn. 2015); Fagan v. Neutrogena Corp., No. 5:13-CV-01316-SVW-OP, 2014 WL 92255, at *1 (C.D. Cal. Jan. 8, 2014) (“Plaintiffs’ claims are not barred by the doctrine of primary jurisdiction . . . [as the] FDA has affirmed that proceedings to define the term natural in the context of cosmetics do not fit within its current health and safety priorities.”); see also Reid v. GMC Skin Care USA Inc., No. 815CV277BKSCFH, 2016 WL 403497, at *1 (N.D.N.Y. Jan. 15, 2016) (rejecting primary jurisdiction in case alleging that face cream with “DNA repair effect” statements was misleading); Randolph v. J.M. Smucker Co., No. 13-80581-CIV, 2014 WL 1018007, at *6 (S.D. Fla. Mar. 14, 2014).

At the same time that the primary jurisdiction doctrine was being buried with respect to “natural” claims, it remained viable in various food cases, particularly those presenting discrete technical questions, i.e. Backus v. Gen. Mills, Inc., 122 F. Supp. 3d 909, 933 (N.D. Cal. 2015) (primary jurisdiction invoked on question of the amount of trans fat in baked goods that is safe); Saubers v. Kashi Co., 39 F. Supp. 3d 1108 (S.D. Cal. 2014) (primary jurisdiction invoked with respect to “evaporated cane juice” labels) (collecting cases). The basis for primary jurisdiction in particular in the ECJ cases is that that FDA has indicated that it WILL issue regulatory guidance on evaporated cane juice – but not until the end of 2016. See also Draft Guidance for Industry on Ingredients Declared as Evaporated Cane Juice; Reopening of Comment Period; Request for Comments, Data, and Information, 79 Fed.Reg. 12,507 (Mar. 5, 2014).  Most evaporated cane juice cases are currently stayed (or dismissed) see, e.g., Gitson, et al. v. Clover-Stornetta Farms, Inc., Case No. 3:13-cv-01517-EDL (N.D. Cal. Jan. 7, 2016) (extending ECJ stay for an additional 180 days, until August 2016) (Laporte, J.); Swearingen v. Amazon Preservation Partners, Inc., Case No. 13-cv-04402-WHO (N.D. Cal. Jan. 11, 2016) (Orrick, J.) (extending ECJ stay and continuing case management conference until July 2016). A few judges have lifted the ECJ stay (impatient at the FDA’s movement) but they appear to be out-liers. See Figy v. Lifeway Foods, Inc., No. 3:13-cv-4828-TEH (N.D. Cal. Jan. 4, 2016), Dkt. No. 57; Swearingen v. Pacific Foods of Oregon, Inc., No. 13-cv-04157 (N.D. Cal. Jan. 5, 2015), Dkt. No. 61.

But we digress.  Back to “natural” and a significant development.  In November 2015, the FDA issued a request for comments regarding the use of the term “natural” in connection with food product labeling. See Use of the Term “Natural” in the Labeling of Human Food Products; Request for Information and Comments, 80 Fed. Reg. 69,905 (Nov. 12, 2015)See our previous blog post.  While noteworthy in and of itself, the FDA’s requests for comments also raised the secondary issue of whether the FDA’s new-found interest in potentially defining “natural” with respect to foods  triggers the primary jurisdiction doctrine?   Last week, the Ninth Circuit answered – Yes. In Kane v. Chobani, LLC, No. 14-15670, 2016 WL 1161782, at *1 (9th Cir. Mar. 24, 2016), the circuit court dealt with an appeal from the Northern District of California where buyers of Chobani fruit flavored Greek yogurt filed suit against  the company alleging that its labels and advertising violated California law because the “all natural” yogurt included fruit juice and turmeric.  Before the district court, the plaintiffs had a difficult time articulating why it was plausible to allege that fruit juice and turmeric are unnatural vacillating between the argument that it is unnatural to use these ingredients to color yogurt and the argument that the fruit juices at issue were so heavily processed that they are no longer natural.  Ultimately the district court found that the case warranted dismissal on Rule 9(b) and 12(b)(6) grounds. Kane v. Chobani, LLC, 973 F. Supp. 2d 1120, 1138 (N.D. Cal. 2014).  Plaintiffs appealed on the basis that under primary jurisdiction their case should have been stayed – not dismissed. And the Ninth Circuit agreed,  vacating the dismissal and remanding to the district court under a stay pending resolution of the FDA’s “natural” proceedings. So a win for the plaintiffs in Chobani – but one that defendants will take careful note of – in the Ninth Circuit and beyond.

 

Share this:
Facebooktwitterlinkedin