Ad Law Defense

How Not To Advertise Your Supplement

January 31, 2017False Advertising, Food, FTCfalse advertising, Florida, Food, FTC

** FTC Claims Major Scalp in Fake News Case **

The recent political season has contributed new words to our lexicon — “alternative facts” (Thanks, Kellyanne!) and “fake news.” While these terms may sound novel to us, the Federal Trade Commission has long taken action to curb such practices in commercial advertising under its mandate to enforce prohibitions on unfair or deceptive acts or practices (15 U.S.C. § 45(a)) and specifically false advertisements for food, drugs, devices, services, or cosmetics (15 U.S.C. § 52).

Recently, the FTC obtained a $29+ million personal judgment (ouch!) against a Tampa Bay businessman based on advertising the FTC claimed lacked scientific substantiation and misled consumers by using a fake news site and article. Fed. Trade Comm’n v. NPB Advert., Inc., No. 8:14-CV-1155-T-23TGW, 2016 WL 6493923, at *9 (M.D. Fla. Nov. 2, 2016). The case centered around one Nicholas Congleton, who — inspired by a clip from The Dr. Oz Show discussing a clinical study of the weight loss effects of green coffee extract (the Vinson Study) — founded Pure Green Coffee. The business was largely operated online, relying on search engine and other digital advertisements (click bait) to the tune of $9.5 million. This advertising investment proved to be money well spent. From 2012 to 2014, Pure Green Coffee generated gross receipts just shy of $34 million.

Much of Pure Green Coffee’s advertising practices are standard grist for the FTC mill – inadequate substantiation for efficacy claims, unsupported establishment claims, and customer testimonials. Pure Green Coffee promised consumers fabulous results – twenty-eight pounds in nine weeks or ten pounds and one-to-two inches of belly-fat in a month. Although Mr. Congleton admitted in his deposition that he had no scientific basis for Pure Green Coffee’s weight loss claims, in opposition to the FTC’s motion for summary judgment he cited to “news articles, blog entries, and manufacturers’ brochures” (non-starters) as well as nine studies – chief among them, the Vinson Study Dr. Oz discussed on TV. Unfortunately, most of the studies either did not involve green coffee extract or weight loss. The Vinson Study was debunked by the FTC’s expert on several bases – but primarily because Dr. Vinson, himself, withdrew it.

The FTC based its argument that Pure Green Coffee made establishment claims in its ads in part on a photo — a man wearing a white doctor’s coat and stethoscope holding a pill. The Court found that this image implied that a physician or scientist had established Pure Green Coffee’s efficacy. As for testimonials, Pure Green Coffee’s online ads committed the cardinal sin – they did not disclose that the participants were compensated.

Which brings us to fake news. Pure Green Coffee purchased the domain “dailyconsumeralert.org” and loaded the page with a spoof banner for “Women’s Health Journal,” a list of several health- or fitness-related categories, and a fake article by a non-existent columnist that offered a purportedly unbiased test of the efficacy of green coffee extract that Mr. Congleton copied and pasted from another website. The online ad also employed the ever popular “AS SEEN ON” advertising device next to the logos of CBS, ABC, MSNBC, and CNN – creating the impression that these networks reported favorably on Pure Green Coffee. The court found that the webpage appeared as a bona fide news outlet and thus misled consumers — despite Mr. Congleton placing the word, “Advertorial” at the top.

Mr. Congleton’s case was not a particularly difficult one for the FTC. But it nevertheless presents a cautionary tale to supplement sellers. First, the more specific the claim, the closer the FTC will scrutinize the substantiation. Depending on the nature of the claim the F.T.C. will require the study to include randomized clinical trials, human as opposed to animal proxy trials, and will take a hard look at the methodology and controls in the testing. Second, images of folks in white coats or hospital scrubs in supplement ads are sure to grab the FTC’s attention. Third, paid endorsers must be identified as such. And finally, supplement makers must guard against intentionally or inadvertently creating fake news.

On this last point, it is critical that supplement companies (and any company engaged in internet marketing for that matter) familiarize themselves with the FTC’s December 2015 Native Advertising Guidelines. These guidelines were developed to advise businesses on how to advertise online without running afoul of the FTC’s prohibition of fake news. While a business might believe its online advertisement clearly appears as such when a consumer views it and, therefore, is not deceptive, the FTC’s position is that “advertisers cannot use ‘deceptive door openers’ to induce consumers to view advertising content. Thus, advertisers are responsible for ensuring that native ads are identifiable as advertising before consumers arrive at the main advertising page.” (Emphasis added.) This is no easy task — as shown by the Guidelines, themselves — which contain 17 different examples of online advertisements and how each should be treated. Suffice it to say, native advertising is a hot button issue for the FTC, and enforcement actions against businesses who ignore the Agency’s guidelines are a growth industry for advertising defense lawyers.

Unresolved Issues in Web Accessibility Consumer Lawsuits

December 30, 2016Consumer Class Action, DOJ, Title IIIADA, Department of Justice, Title III

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

By: Brent E. Johnson

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.

Say It Like You Don’t Mean It

November 19, 2016False Advertising, FDCPA, FTCfalse advertising, FDCPA, FTC

** The FTC Weighs In On OTC Homeopathic Drugs With New Disclosure Requirements **

By: Brent E. Johnson

This past Tuesday, the FTC issued its brand new Enforcement Policy Statement on Marketing Claims for OTC Homeopathic Drugs. In sum, the FTC is fine with homeopathic drug makers advertising and labeling their products as effective in treating certain conditions – as long as they prominently disclose that their products don’t really work.

As we’ve blogged about recently, homeopathy is the brainchild of the German physician, Samuel Hahnemann (1755-1843), who divined the concept of “like cures like.” As the FTC explains, “Homeopathy . . . is based on the view that disease symptoms can be treated by minute doses of substances that produce similar symptoms when provided in larger doses to healthy people.” In what has become the subject of much controversy over time, homeopathy made its way into the Food Drug and Cosmetic Act of 1938. The FDCA defines drugs to include “articles recognized in the . . . official Homeopathic Pharmacopoeia of the United States. (‘HPUS’)” 21 U.S.C. § 321(g)(1)(A). The HPUS is a weighty tome first published in 1897 that sets forth standards for manufacturing homeopathic drugs as dictated by the Homeopathic Pharmacopoeia Convention of the United States. Just how homeopathic remedies became “drugs” under the FDCA is shrouded in the mists of time, but it is generally accepted that New York Senator Royal Copeland, a homeopath, family physician, and sponsor of the FDCA, had a hand in it.

In 1988, the FDA issued its Compliance Policy Guide (CPG) for homeopathic drugs titled, “Conditions Under Which Homeopathic Drugs May be Marketed.” The CPG allows homeopathic drug makers to sell OTC products without demonstrating their efficacy. CPG Sec. 400.400. This allowance, however, applies only to homeopathic products intended for “self-limiting disease conditions” (i.e., medical problems that will go away on their own anyway) that are amenable to self-diagnosis and treatment. The CPG mandates that OTC homeopathic drugs are labeled as “homeopathic” and that the labels display at least one major OTC indication for use.

The sale of homeopathic remedies has grown hand-in-hand with nutritional supplements over the past two decades. Unlike supplements making nutritional deficiency, structure/function, or general well-being claims, however, the FDA does not require OTC homeopathic products to carry a disclaimer such as, “This statement has not been evaluated by the Food and Drug Administration. This product is not intended to diagnose, treat, cure, or prevent any disease.” So, in the world of OTC homeopathic drugs, the FDA actually requires a use indication but doesn’t require substantiation or a disclaimer.

Enter the FTC. Responding to pressure from consumer advocacy groups and, particular to this case, the Center for Inquiry (an organization that aims “to foster a secular society based on science, reason, freedom of inquiry, and humanist values”), the FTC issued its Enforcement Policy. In it, the FTC impliedly acknowledges that, even though it has always had enforcement authority over homeopathic OTC drug makers, it has generally chosen not to police false or misleading advertising or labeling of their products due to the FDA’s 1988 CPG. But no more! Directly contradicting the CPG’s requirement of usage indications without the need to demonstrate efficacy, the FTC is announcing to homeopathic product makers everywhere that their products are not exempt “from the general requirement that objective product claims be truthful and substantiated.”

The FTC believes this will be no easy feat: “For the vast majority of OTC homeopathic drugs, the case for efficacy is based solely on traditional homeopathic theories and there are no valid studies using current scientific methods showing the product’s efficacy.” So what’s a homeopathic OTC drug manufacturer to do? Just add to your product’s label (in close proximity to the FDA’s required efficacy indication or incorporated into it) that “(1) there is no scientific evidence that the product works and (2) the product’s claims are based only on theories of homeopathy from the 1700s that are not accepted by most modern medical experts.” Simple enough (although try fitting it on a label). But the FTC further warns, “In light of the inherent contradiction in asserting that a product is effective (the FDA’s requirement) and also disclosing that there is no scientific evidence for such an assertion, it is possible that depending on how they are presented many of these disclosures will be insufficient to prevent consumer deception.” The FTC recommends that marketers conduct consumer surveys “to determine the net impressions communicated by their marketing materials.” And to make sure there is no possible avenue of escape, the FTC includes this flourish: “Marketers should not undercut such qualifications with additional positive statements or consumer endorsements reinforcing a product’s efficacy.” In short, if you can’t say something bad about the product, say nothing at all.

Container Size Speaks Volumes in a Lanham Act Case

October 20, 2016Direct Competitor Lawsuit, Lanham Act, Multi-Panel Litigation, Slack Fill Suitconsumer action, Direct Competitor Lawsuit, false advertising, Lanham Act

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

By: Brent E. Johnson .

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.

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

October 13, 2016All Natural Litigation, Certification, False Advertising, FDA, Food, Individualized Damages, Injunctive ReliefAll Natural, California, certification, commonality, FDA, Ninth Circuit, Reasonable Consumer, UCL

** Appeal Court Panel Holds That Genuine Dispute Remained As To Whether All Natural Claims Would Survive Reasonable Consumer Test **

By: Brent E. Johnson hires-2 Judge Lucy H. Koh gave all natural class defendants cause for celebration back in 2014 when she closed the door on a putative class representative’s claim that Dole’s fruit juices and fruit cups were wrongfully labelled as “All Natural.” Brazil v. Dole Packaged Foods, LLC, No. 12-CV-01831-LHK, 2014 WL 6901867 (N.D. Cal. Dec. 8, 2014). Last week, however, the Ninth Circuit re-opened that door slightly – at least enough for the plaintiffs’ bar to try to squeeze their feet in.

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

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

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

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

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

Proving a Negative

October 2, 2016False AdvertisingCalifornia, class action suits, Homeopathy, labeling

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

By: Brent E. Johnson

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

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

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

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

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

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

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

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

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

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

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

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

Good Vibrations

September 19, 2016Consumer Class ActionConsumer Class Action, Illinois, Privacy

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

By: Brent E. Johnson _

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.

The New Naturals

September 15, 2016All Natural Litigation, Consumer Class Action, FDA, FoodAll Natural, California, consumer action, craft beer, FDA, labeling, puffery, Reasonable Consumer

** Where are Class Action Claims Against Consumer Food and Personal Product Companies Trending in 2016?**

By: Brent E. Johnson

Print We 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 standard. That 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 Mills’ Cheerios 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.

Lawyers Don’t Always Win

September 13, 2016Consumer Class Actionconsumer action, First Amendment, Illinois, Privacy

** Purported Class of Lawyers Suing for Misappropriation of Image and Likeness Fails at First Hurdle **

By: Brent E. Johnson

crsfkvk5jmarrd3ls7emnw-avvo_logo-color_blue_tagline Bucking 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.

Pokemon GMO

August 25, 2016FDA, Federal Preemption, Food, UncategorizedFDA, GMO

** Update on the National Bioengineered Food Disclosure Standard Law **

By: Brent E. Johnson

closeup of a GMO UPC symbol on white

By a stroke of the pen, President Obama put to rest for all time (by “all time,” we mean a decade) the brouhaha over labeling foods containing GMO ingredients. By signing the National Bioengineered Food Disclosure Standard law on July 29, 2016, the President and Congress proclaimed to the citizenry that GMO labeling is important — but not so important that the labels actually have to be seen. How did we get to this point? A brief history is in order.

When one of the editors of this blog watches Netflix with his English Bulldog, he is enjoying the companionship of a genetically modified organism (“GMO”). Long before the first GMO food – the Flavr Savr tomato — hit grocery store shelves in 1994, humans were engineering crops and livestock the old fashioned way – selective breeding. Modern GMOs, of course, differ from those derived from selective breeding. They are developed on a molecular level – a specific gene from a donor organism that expresses a desirable trait is inserted into the genome of the target organism to give the latter that same trait. While consumer organizations and environmental activists have sounded the tocsin (or toxin) over GMOs since the beginning of bio-engineering, the federal government – particularly the FDA – has not been alarmed.

Two years before Flavr Savr, the FDA published its “Statement of Policy: Foods Derived from New Plant Varieties.” In this document, the FDA reminded the public that a food additive must be approved prior to use unless it is “generally recognized as safe” (GRAS). The FDA concluded that, while a plant gene inserted into another plant is an additive, generally that gene is GRAS. “The agency is not aware of any information showing that foods derived by these new methods differ from other foods in any meaningful or uniform way, or that, as a class, foods developed from the new techniques present any different or greater safety concern than foods developed by traditional plant breeding.” Based on that logic, the FDA’s regulations for plant GMOs are the same as those for traditional foods with the exception of a voluntary (“recommended”) consultation procedure with which developers of GMO-containing foods typically comply. (Note that the USDA’s Animal and Plant Health Inspection Service plays a limited regulatory role with regard to GMOs that pose a risk to other plants or animals and the EPA regulates GMOs that are bio-engineered to produce a pesticide – for example, the infamous, but unblemished, Bt-corn.)

In the 1992 Policy, the FDA eschewed requiring food companies incorporating plant GMOs to label their products as such under the Federal Food, Drug, and Cosmetic Act because “the agency does not believe that the method of development of a new plaint variety (including recombinant DNA techniques) is normally material information within the meaning of 21 U.S.C. 321(n).” The FDA has not deviated from this position in the past quarter decade. The agency’s website has a page directed to consumers which rhetorically asks, “Are foods from GE plants safe to eat?” The response is, “Yes. Credible evidence has demonstrated that foods from the GE plant varieties marked to date are as safe as comparable, non-GE foods.”

The FDA’s refusal to mandate that food companies label their products containing GMOs does not mean that consumers who care about such things have been stymied. In 1990, Congress enacted and George Herbert Walker Bush signed the Organic Foods Production Act, which required that the USDA develop national standards for organic products. Ten years later, the USDA issued its final rule establishing the National Organic Program (NOP), which governs both fresh and processed food products, including crops and livestock. The “USDA Organic” label means many things under the NOP — but one of them is no genetic engineering. GMOs are prohibited in organic products as excluded methods of production. 7 CFR § 205.105. Therefore, a consumer that doesn’t want to ingest a GMO need only look for the “USDA Organic” label.

The NOP was not enough for Vermont. In 2014, Vermont enacted Act 120 – a manifesto against the federal government’s oversight of GMOs — that required labels on products containing genetically engineered ingredients. “[F]ood offered for sale by a retailer after July 1, 2016 shall be labeled as produced entirely or in part from genetic engineering if it is a product: (1) offered for retail sale in Vermont; and (2) entirely or partially produced with genetic engineering.” Act 120, § 3043. In addition, “a manufacturer of a food produced entirely or in part from genetic engineering shall not label the product on the package, in signage, or in advertising as ‘natural,’ ‘naturally made,’ ‘naturally grown,’ ‘all natural,’ or any words of similar import that would have a tendency to mislead a consumer.” Id.

The food industry went into an uproar over Vermont’s law because – given the realities of interstate commerce – companies would have to change their labeling nationwide to satisfy the demands of Vermont. While manufacturers have had to bend to the legislative will of California from time to time (“Made in the USA”/Prop 65), it’s quite another thing to answer to Vermont.

Due, in part, to persistent lobbying, Congress enacted the Bioengineered Food Disclosure Standard law just in time to pre-empt Vermont’s organic labeling law from going into effect. The law requires that the USDA “establish a national mandatory bioengineered food disclosure standard with respect to any bioengineered food and any food that may be bioengineered” by July 2018. Therefore, GMO labeling will be required nationwide sometime after 2018. But because Congress clearly believes that this law is a solution in search of a problem, the statute has a unique labeling provision that “require[s] that the form of a food disclosure under this section be a text, symbol, or electronic or digital link . . . with the disclosure option to be selected by the food manufacturer.” What does this mean? Simply put, food companies will have the option of either a product label with a bar code accompanied by the words, “scan here for more food information” or a toll-free telephone number with “call for more food information.” In short, an actual GMO disclosure on the label is not required. Consumers who care will roam supermarket aisles – smart phones in front of their faces – scanning bar codes to find their non-GMO groceries like Pokemon Go zombies looking for Poke Balls.