Multi-Panel Litigation

Container Size Speaks Volumes in a Lanham Act Case

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

Cardboard Boxes Balancing on a Seesaw

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

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

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

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

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False Advertising to the Dogs

**Record Payout By Blue Buffalo in Multi District Pet Food Class Settlement sparked by Nestle Purina Competitor Law Suit** . . .                                                                                                                                                                                                                                            

Competitor lawsuits give class action plaintiffs a helpful leg-up.  See Prior post.  The Blue Buffalo matter is a good case in point.  Blue Buffalo makes pet food which was advertised, amongst other things, as not containing animal by-products or grain.  According to Blue Buffalo’s main competitor Nestle Purina that advertising claim is not true.  Nestlé Purina PetCare Company v. Blue Buffalo Company Ltd., Civil Case No. 4:14-cv-008590 (E.D. Mo. May 6, 2014) Compl. ECF No. 2, see also First Amended Compl. (Nov. 13, 2014) ECF No. 104.  Nestle Purina’s claim was that its own lab testing of the Blue Buffalo’s products found – contrary to the advertising – both poultry by-products and grain.  And indeed, during discovery, Nestle Purina claims that it found smoking gun emails between Blue Buffalo’s suppliers and brokers about by-products in the supply chain (and unfortunately for Blue Buffalo the emails literally used the phrase “smoking gun”).  See 4:14-cv-00859-RWS, Doc. #. 77-1 (E.D. Mo. Oct. 10, 2014).  The inevitable consumer led class actions ensued (using the Nestle Purina claims and findings as their model)–: Fisher et al v. The Blue Buffalo Company, Ltd. et al, Case No. 14-cv-5937 (C.D. Cal.); Teperson et al v. The Blue Buffalo Company, Ltd et al, Case No. 14-cv-1682, (S.D. Cal.); Delre et al v. Blue Buffalo Co., Ltd, Case No. 14-cv-768, (D. Ct.); Renna et al v. Blue Buffalo Co., Ltd., Case No. 14-cv-833, (D. Ct.); Mackenzie et al v. The Blue Buffalo Company, Ltd., Inc., Case No. 14-cv-80634, (S.D. Fl.); Stone et al v. Blue Buffalo Company Ltd., Case No. 14-cv-520, (S.D. Ill.); Keil et al v. Blue Buffalo Company, Ltd., Case No. 14-cv-880, (E.D. Mo.); Hutchison et al v. Blue Buffalo Company, Ltd., Case No. 14-cv-1070, (E.D. Mo.); Andacky et al v. The Blue Buffalo Company, Ltd., Case No. 14-cv-2938, (E.D. N.Y.).  Blue Buffalo in turn counterclaimed against Nestle Purina asking for an injunction to stop Nestle Purina from its advertising attacking Blue Buffalo’s practices.  And when the “smoking gun” appeared, Blue Buffalo sued the third party companies who allegedly supplied it with by-product material.  The various class complaints were transferred after a Multi District Litigation Panel hearing to federal court in Missouri.  In re Blue Buffalo Co., Ltd. Marketing and Sales Practice Litigation Case No. 4:14-md-02562-RWS (E.D. Mo.).   On December 9, 2015 class settlement and class certification approval was filed.  ECF No. 159.  The court, preliminarily approved the certification and settlement a week later.  ECF No. 164.  The fairness hearing is set for May 19, 2016.  Nestle Purina is trumpeting the $32 million settlement as the “largest pet food class action settlement in history.” Interestingly, Blue Buffalo fought most of the litigation at the same time as listing its IPO.  The class action’s impact on the IPO is unclear – the shares gained 38 percent on the issue’s first full day of trading on the Nasdaq in July 2015.  That said, pursuant to the settlement Blue Buffalo will take a charge against Q4 2015 earnings of $32 million. In the third quarter, the company’s net profit totaled $27 million.

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Pepper Purchaser Problems

**Spice Maker McCormack Moves the Multi-District Panel to Consolidate From Around the Country its Black Pepper “Slack-Fill” Lawsuits ** . . .                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

A “slack-fill” lawsuit is the term given to a consumer action alleging that a company is using empty space in non-transparent containers in a misleading or otherwise illegal manner, i.e. to confuse consumers as to volume or amount of the actual product they are buying.  U.S. Food and Drug Administration (FDA) regulations contain a deeming provision that claimants typically rely on: “[a] container that does not allow the consumer to fully view its contents shall be considered to be filled as to be misleading if it contains nonfunctional slack-fill.”  21 C.F.R. § 100.100 (emphasis added).  McCormick & Company is the newest target of nonfunctional “slack-fill” plaintiffs – the company has been sued in multiple states not just by consumer plaintiffs but also by in a competitor action under the Lanham Act.

The first to file was Watkins Inc., who  sell spices and herbs in direct competition with McCormick.  Watkins’ complaint filed on June 15, 2015, alleges that McCormick responded to a recent increase in black pepper prices by using misleading slack fill.  Watkins Inc., v. McCormick and Co., Inc., 0:15-cv-02688-DSD-BRT (D. Minn.).  Watkins alleges that McCormick’s (and other manufacturers) sell pepper in almost identical sized tins that traditionally have held 2, 4 or 8 ounces respectively – without slack fill.  But Watkins alleges that in early 2015, due to a sharp rise in international black pepper prices, McCormick began filling these same pepper tins with approximately 25% less ground pepper without changing the size and shape of the tin and without changing the price.  Because the tins were not transparent, the complaint alleges that consumers could not see that they were “slack-filled.”  Watkins avers that McCormick has violated the Lanham Act and various state consumer laws .

Consumer-driven “copycat” suits were quickly filed around the country.  Dupler v. McCormick & Company, Inc., No. 2:15- cv-3454-SJF-AKT (E.D.N.Y.); Bunting et al. v. McCormick & Company, Inc., No. 3:15-cv- 1648-BAS-BGS (S.D. Cal.); Marsh v. McCormick & Company, Inc., No. 2:15-cv-1625-MCEEFB (E.D. Cal.); Esparza v. McCormick & Company, Inc., No. 2:15-cv-5823-JFW-E (C.D. Cal.); Bittle v. McCormick & Company, Inc., No. 3:15-cv-989 (S.D. Ill.); Ferreri v. McCormick & Company, Inc., 7:15-cv-6760-KMK (S.D.N.Y.); Linker v. McCormick & Company, Inc., 4:15-cv-01340-CDP (E.D. Mo.).  On August 10, 2015, McCormick moved to have the cases consolidated.  Case MDL No. 2665.

This case is one to watch.  McCormick’s principal defense is straightforward – i.e., whatever plaintiffs’ claims may be about what volume they thought they were buying based on the traditional size of the container, the tins clearly and unambiguously stated the correct volume.  It is also one to watch because of the unusual interplay between competitor and consumer lawsuits.  Arguments at the MDL Panel currently are focused, not on the merits, but on whether the cases should be consolidated, and if so, where.

This McCormick case is just the latest in a string of slack-fill suits.  In March, 2015, Starbucks® faced a lawsuit alleging that it covered the neck of otherwise transparent glass bottles containing   Frappuccino® and Iced Coffee with opaque wrapping that concealed non-functional slack-fill.  Lee et al v. Starbucks Corporation 1:15-cv-01634-CBA-VMS (E.D.N.Y).  The practice alleged by plaintiff is that Starbucks misled consumers as to how much liquid was in the bottles. The plaintiffs seek class action status, alleging that consumers across the country were injured by Starbucks’ alleged slack-fill practices.  This case is another one to watch.  There are many legitimate reasons a company will use slack-fill in its products, such as protecting the contents and accommodating tamper-resistant devices, or that the space is caused by product settling during shipping and handling.  (A listing of legitimate reasons for slack-fill in food product containers as identified by the FDA can be found at 21 C.F.R. § 100.100).  It is not clear at present which defense Starbucks will take.

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