admin

Phantom Discounts Hurting Retailers

Consumer Class Action, Phantom Discounts, , ,

**Momentum Building Against Retailers and Department Stores Sued by Purported Class Representatives Alleging that Advertised “Sales Price” Marketing and Labels are Misleading Consumers** . . .                                                                                                                                                                                                                                                                                                                                         

By: Brent E. Johnson

On October 9, 2015 Nordstom failed in its attempt to have the district court in its California’s Unfair Competition Law (UCL) (Cal. Bus. & Prof. Code § 17200 et seq.) and Fair Advertising Laws (FAL) (Cal. Bus. & Prof. Code § 17500 et seq) purported class action case dismiss under Rule 12.  Branca v. Nordstrom, Inc., S.D. Cal., No. 3:14-cv-02062, Order, ECF No. 30, October 9,  2015.  Plaintiff bought his case alleging that the companies outlet Nordstrom Rack stores used tags with two prices on it: a “Compare At” price and below that the “Actual Price” – the latter a steep discount on the former.  Plaintiff alleges he believed the Compare At price was the price for the item at Nordstrom’s mainline stores, or at least the prevailing market price in department stores.  Accordingly, when he found out that his purchased items were never sold at mainline stores – he alleges that his perceived “discount” was illusory and that he was misled.  Judge Michael M. Anello of the U.S. District Court for the Southern District of California disagreed with Nordstrom’s motion to dismiss, holding that Plaintiff’s theory of being misled was robust enough to pass the reasonable consumer test at the crux of California consumer law.  Equally problematic for Nordstrom, Judge Anello ruled that Plaintiff could represent a class of consumers wider that those who could identify with respect to the exact item he purchased.  The district court here considered cases such as Anderson v. Jamba Juice Co., 888 F. Supp. 2d 1000 (N.D. Cal. 2012) and Astiana v. Dreyer’s Grand Ice Cream, Inc., Nos. C-11-2910 EMC, C-28 11-3164 EMC, 2012 WL 2990766 (N.D. Cal. July 20, 2012) – where courts found that Plaintiffs had standing with respect to items not identical – but substantially similar to the product to which Plaintiff purchased (i.e. a different flavor in the same range) – as analogous and persuasive.  Here the court found that the “Compare At” labels were identically used across the store, even though the products which they might have been affixed to differed.  This has the potential to create a class of consumers who purchased hundreds, if not thousands of items, not just the limited class of people who purchased the exact sweatshirt and cargo shorts that Plaintiff Branca in this case alleged that he bought.

This marks another notch in the belt of Plaintiffs’ lawyers against major department stores.  In a similar case, JCPenny were sued in relation to its use of “Discounted Price” and “Sales Rack” pricing – and the retailer lost on its motion for summary judgment.  Spann v. J.C. Penney Corp., No. SA CV 12-0215 FMO, 2015 WL 1526559, at *2 (C.D. Cal. Mar. 23, 2015).  It subsequently also lost on it opposition to class certification.  Spann v. J.C. Penney Corp., 307 F.R.D. 508 (C.D. Cal. 2015).  In Gattinella v. Michael Kors, No. 14-cv-5731, 2014 WL 7722027 (S.D.N.Y.), a similar “outlet” discount case was litigated and ultimately settled for $4,900,000. See 32 NY. J.V.R.A. 6:8.  Similar cases are pending against TJ Maxx (Chester v. The TJZ Companies., 5:15-cv-01437-DDP-DTB (C.D. Cal.)) Kohl’s (Chowning v Kohl’s Department Stores, Inc., 3:15-cv-01624-JAH-WVG (S.D. Cal.)).

All Eyes on the Supreme Court for Consumer Class Action Lawyers

Article III Standing, Ascertainability, Rule 23, Supreme Court, , , , , , , , , , , ,

supreme-court

**The Supreme Court’s 2015 Term Opens With a Series of Cases Important for Consumer Class Action Defendants: Campbell-Ewald v Gomez, Spokeo v Robins and Tyson Foods v Bouaphakeo** . . .                                                                                                                                              

By: Brent E. Johnson                                                                                                         

In recent years, the Supreme Court has handed down victories to the class action defense bar.  In Wal-Mart v. Dukes, 564 U.S. ___ (2011), the Court reversed a California district court certification of a gender discrimination class – raising the bar on commonality questions for plaintiffs.  In Comcast v. Behrend, 569 U.S. __ (2013), the Court again reversed a district court certification – heightening scrutiny on plaintiffs’ methods for alleging class wide damages.  As the 2015 term opens this week, defense counsel around the country eye further potential victories in three key cases.

The first case up is Campbell-Ewald Co. v. Gomez (No. 14-857) on appeal from the Ninth Circuit where the Court will deal with two frequently litigated questions as yet unresolved by the circuits.  Namely, does a Rule 68 offer of complete relief to a plaintiff moot his or her claim and, if so, does it also moot the resulting class claim under Rule 23?  The underlying case concerns unsolicited text messages prohibited by the Telephone Consumer Protection Act (TCPA) 47 U.S.C. § 227.  The TCPA contains a statutory remedy and defendants argued that, to the extent they had offered Plaintiff  the full amount of the statutory remedy (per Rule 68) as relief,  the plaintiff suffered no cognizable Article III damages.  Thus, defendants argue that because the plaintiff suffered no injury,  he has no right to represent a class of people who may have been damaged.  From a practical perspective, the case addresses the question:  Can a defendant “pick off” would be class representatives through Rule 68 offers of judgment thereby destroying the foundation of the class action claim?  As anyone who has defended corporations receiving required pre-litigation notices under consumer protection statutes has observed, plaintiff law firms have become increasingly reticent to disclose the identity of their clients at the notice stage in order to forestall Rule 68 offers of judgment until the putative class action lawsuit has been filed.

The second case is Spokeo Inc. v. Robins, (No. 13-1339) also on appeal from the Ninth Circuit.  This case involves a related question of Article III standing for class representatives.  Spokeo concerns the  Fair Credit Reporting Act, 15 U.S.C. § 1681 (FCRA), which requires consumer credit agencies to take reasonable steps to ensure the accuracy of their published reports.  Plaintiff in a putative class action argued in the Central District of California that results for his name on the Spokeo website contained inaccurate information about plaintiff’s education and professional experience – and that this inaccuracy harmed his employment prospects.   The District Court dismissed, finding that the alleged damages – based on hypothetical impact on his employment – were too speculative to satisfy Article III standing.  The Ninth Circuit reversed, holding that the statutory violation implicitly creates a private cause of action to enforce and that this violation of a statutory right was an “injury” sufficient to confer standing.  The Ninth Circuit Spokeo decision was the latest in a circuit split – on one side the Second and Fourth circuits, which have rejected standing arguments from plaintiffs who alleged bare statutory violations that did not result in any actual harm (Kendall v. Emps. Ret. Plan of Avon Prods., 561 F.3d 112 (2d Cir. 2009); David v. Alphin, 704 F.3d 327 (4th Cir. 2013)); and the Ninth Circuit joining the Sixth and Seventh Circuits, which have come out on the side of recognizing “damages” for private plaintiffs with respect to minor statutory violations.  Beaudry v. TeleCheck Servs, 579 F.3d 702 (6th Cir. 2009); Murray v. GMAC Mortg. Corp., 434 F.3d 948 (7th Cir, 2006).  If the Supreme Court recognizes damages irrespective of actual harm, the impact could be felt more broadly than FCRA – there are numerous similar statutory schemes, including truth-in-lending legislation (15 U.S.C. § 1640(a)); debt collection statutes, (15 U.S.C. § 1692k(a)); as well as various privacy laws (18 U.S.C. § 2710(c)(1); 47 U.S.C. § 551(f)(1)-(2)).

The third case is Tyson Foods v. Bouaphakeo (No. 14-1146) – a challenge to a $5.8 million wage-and-hour judgment in favor of a class of employees at Tyson’s meat packing plant in Iowa.  Tyson’s petition seeks a reversal of the district court and Eight Circuit’s decision to permit liability and damages verdicts to be based – not on an individual analysis of each purported class member – but by extrapolating a statistical average across the board based on the discrepancies observed in a sample class of workers’ hours and pay.  Tyson further appeals on the lack of ascertainability of the class itself – that is, that the certified group (even according to the Plaintiffs’ own expert) included a significant number of people who weren’t underpaid at all.  If successful, the Tyson case will build upon the Court’s disapproval in Wal-Mart of “trial by formula” and provide a significant bulwark against plaintiffs in putative class actions glossing over differences amongst their claimed class in order to achieve certification.

Not surprisingly, this trifecta of cases has generated a significant amount of interest, amicus briefing, and optimistic thinking from the defense bar that momentum is on its side.  The implications are not insubstantial if defendants prevail:  the type of de facto strict liability for statutory compliance created by such class actions will diminish, there will be new avenues to derail cases pre-certification, and the barrier of ascertainable and reliable class wide damages that plaintiff s must hurdle will be reinforced.

Safe Harbor for Vodka

Alcohol Labeling, Consumer Class Action, Safe Harbor Defense, , ,

**District Court Applies Federal Alcohol Administration Act to State Consumer Law Safe Harbor to Dismiss “Handmade” False Advertising Claims Against Vodka Maker in Florida** . . .                                                                                                                                                                                                                                                                                                                          

By: Brent E. Johnson                  

Recently there has been a raft of purported class actions targeting beer and spirits makers.  See prior post.  Generally, defendants have been successful on motions to dismiss on their argument that puffery such as “handmade” or “craft” are not actionable terms.  Defendants generally have not been successful in asserting an absolute defense based on state law safe harbors.  The safe harbor defense is not complicated –  a state consumer law action cannot be asserted against labels authorized by federal law – and in that alcohol labels must be approved by the Alcohol and Tobacco Tax and Trade Bureau (TTB), then alcohol makers have an absolute defense.  Courts have been reticent to accept this argument at the pleading stage.  In a recent Florida district court case, common sense on this point has prevailed.  In Pye v. Fifth Generation, Inc., No. 4:14CV493-RH/CAS, 2015 WL 5634600, at *1 (N.D. Fla. Sept. 23, 2015), defendants – the makers of Tito’s Handmade Vodka – were sued (inter alia) under Florida’s Deceptive and Unfair Trade Practices Act, Florida Statutes§§ 501.201-501.213 (DUTPA) on the allegation that “handmade” and “old fashioned” claims were misleading.  DUPTA includes a safe-harbor provision: it “does not apply to … an act or practice required or specifically permitted by federal or state law.” § 501.212(1).  The safe harbor has been successfully used by pharmaceutical companies (i.e. whose products are heavily regulated by the FDA) in relation to their labeling.  See, e.g., State of Fla., Office of Atty. Gen., Dept. of Legal Affairs v. Tenet Healthcare Corp., 420 F. Supp. 2d 1288, 1310 (S.D. Fla. 2005); Prohias v. AstraZeneca Pharm., L.P., 958 So. 2d 1054, 1056 (Fla. 3d DCA 2007).  The Federal Alcohol Administration Act (FAA) regulates the distribution of distilled spirits, including labeling and packaging. See 27 U.S.C. § 205(e); 27 C.F.R. § 5.42(a).  The TTB enforces these provisions in a number of ways, chiefly through requiring alcohol labels to have a valid Certificate of Label Approval (“COLA”).  Before issuing a COLA, the TTB evaluates and preapproves the alcohol label to ensure it contains all mandatory information and contains no prohibited or misleading information.  The court noted in Pye that the TTB had expressly approved Defendant’s label and, therefore, it was specifically permitted by federal law within the meaning of Florida Statutes (§ 501.212.)  On that basis, plaintiff’s Florida consumer protection claims were dismissed with prejudice.

 

Muscling a Settlement

Consumer Class Action, Pre-Certification, Settlement, ,

protein powder. Supplements for bodybuilders

**Musclepharm negotiates a pre-certification settlement of claims made in relation to claims that its Protein Powder has misleading protein spiking ingredients ** . . .                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

By: Brent E. Johnson                                                                                                                                                     

Musclepharm has been sued in the Central District of California alleging that its Combat Powder whey protein is misleadingly labeled.  The case centers around the phenomena of protein spiking: the allegation that because Food and Drug Administration (FDA) guidelines that measure protein use nitrogen as its baseline – a manufacturer can spike the level of the FDA protein measure by adding cheaper non-protein nitrogen sources (such as amino acids, creatine etc.)  In Bruaner v. MusclePharm Corp., No. CV148869FMOAGRX, 2015 WL 4747941, at *1 (C.D. Cal. Aug. 11, 2015), the plaintiff has taken a novel approach. It alleges not that protein spiking, itself, is misleading but that Musclepharm’s advertising is misleading because it contains a “Brand Promise” that represents that Musclepharm does not engage in the practice of protein spiking – when plaintiff’s testing allegedly suggests that it does.  On a motion to dismiss, Musclepharm argued that the FDA has primary authority over this area and FDA labeling regulations preempt state law claims.  On August 11, 2015, the district court rejected those arguments.  Bruaner v. MusclePharm Corp., No. CV148869FMOAGRX, 2015 WL 4747941, at *1 (C.D. Cal. Aug. 11, 2015).  The court agreed with plaintiff that plaintiff’s case was not challenging the FDA labeling or testing protocols per se, but rather, was challenging what Musclepharm states in its advertising about those tests.  Plaintiff did not have a complete victory, however.  The court took exception to plaintiff’s vague descriptions of advertising and websites that he claimed to have relied on in making his purchase decisions – thereby limiting the scope of plaintiff’s proposed case and class.  With both parties winning some and losing some of their arguments at the Rule 12(b)(6) stage, the matter settled.  Because the proposed settlement was pre-certification, the court did not need to review or approve the proposed – the parties filed a stipulation to that effect and the matter was dismissed on September 28, 2015.

Google Reversed on Rule 23

Individualized Damages, Rule 23, , , , ,

**Ninth Circuit Chips Away at Individualized Damage Preclusion under Rule 23 Predominance – reversing Google’s District Court Win on Certification ** . . .                                              

By: Brent E. Johnson                                                                                                                                                     

The Ninth Circuit has held in Pulaski & Middleman, LLC v. Google, Inc., No. 12-16752, 2015 WL 5515617 (9th Cir. Sept. 21, 2015) that under California’s Unfair Competition Law (UCL) (Cal. Bus. & Prof. Code § 17200 et seq.) and Fair Advertising Laws (FAL) (Cal. Bus. & Prof. Code § 17500 et seq there is no need for a court to make individual determinations regarding entitlement to restitution.  In this case, Google was sued in the Northern District of California in relation to its ubiquitous AdWords advertising.  Plaintiff alleged that it was unfair and misleading for Google to charge AdWords users for ads that were served up on error pages and parked domains (i.e. on pages with no real content).  The district court denied certification holding that it could not simply assume that every AdWords member who had ads placed on error or parked pages derived no economic benefit from the ads.  Rather, an individualized analysis was required that precluded class treatment.  The Ninth Circuit panel disagreed.  It held that under California’s UCL and FAL, the test is whether members of the public were “likely to be deceived” – thus an individualized inquiry is not required to achieve certification.  In other words, the Ninth Circuit parsed between an entitlement to restitution (a common question) and what the restitution actually is (an individual question) and held that only the former was required at the certification stage.  As such, the circuit panel held it was legal error for the district court to focus on individualized restitution.  The court held that its ruling in Yokoyama v. Midland Nat. Life Ins. Co., 594 F.3d 1087 (9th Cir. 2010) that damage calculations alone cannot defeat certification governed.   The Ninth Circuit’s laser focus on “liability” and its warning to district courts not to  conflate restitution calculations with liability inquiries (which can be traced back to the California Supreme Court In re Tobacco II Cases, 46 Cal.4th 298 (2009)) sets a difficult course for UCL and FAL defendants to navigate.

Made in the USA: In California

Labeling, Made in the USA, , , ,

**California re-casts its labeling standards for “Made in the USA” labels – bringing it closer in line with Federal Trade Commission Regulations and the “Virtually All Standard” ** . . .                                                                                                                                                                                                                                                                                                                                                

By: Brent E. Johnson           

The California legislature has not been shy in being the outlier in consumer protection law. It’s Made in the USA statute is no exception.  Since 1961, California has expressly prohibited the designation of products as “Made in the USA” or “Made in America” when the product or “any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” Cal. Bus. & Prof. Code § 17533.7 (emphasis added).  Accordingly, to comply with California law, companies have had to ensure that every component of their products be made domestically – “down to the last screw.”  Benson v. Kwikset Corp., 152 Cal. App. 4th 1254, 1285 (2007) (dissenting opinion).  With diversified and international supply chains the norm, complying with this standard has been problematic if not impossible.

Under Federal law, the Federal Trade Commission (FTC) has power to regulate Made in the USA labeling.  15 U.S.C. § 45a.  Notably, the FTC’s standard is not as strict as the California standard. Under FTC regulations, under the “virtually all standard” if almost all of the product is made in the United States, then it complies.  62 FR 63756-01 at pp. 63757, 63764–65.  That is, negligible or early stage components of products assembled or processed in the United States do not offend the law.  Id.  California’s law had no similar latitude, meaning a product could comply with FTC regulations but still run afoul of California law.

This has been a significant irritant for consumer companies, requiring them to create multiple sets of labels – or more commonly – having to apply the higher California standard across all of their U.S. marketing and labeling.  California courts have not been particularly sympathetic to this dissonance finding that at least hypothetically it is possible to comply with both laws simultaneously and, therefore, there is no federal preemption.  See Clark v. Citizens of Humanity, LLC, No. 14-CV-1404 JLS WVG, 2015 WL 1600679, at *5 (S.D. Cal. Apr. 8, 2015).  A bill currently before Congress, S. 1518., the “Reinforcing American-Made Products Act of 2015” proposes to clarify the impasse by specifically articulating that the federal government has complete control over country-of-origin labels and would specifically preempt all conflicting state standards.

California legislators have spoken first.  Taking effect January 1, 2016, Senate Bill 633, will allow manufacturers to label a product as “Made in the USA” if the foreign made parts do not constitute more than 5% of the final value of the product (or 10% if the foreign parts are not available from a domestic source).  Senate Bill 633, introduced by Senator Jerry Hill, a San Mateo Democrat, was signed into law on September 1, 2015.  This change shifts California from its unique position on labeling and more closely aligns it with the labeling standards used by the Federal Trade Commission (“FTC”).  There is not perfect alignment, however, and marketers selling products in California will still have to deal with different standards.  Nevertheless, the California bright line test provides some welcome clarity.

Craft, Draft or Daft?

Alcohol Labeling, Consumer Class Action, , , ,

 

**Plaintiffs’ Lawyers Failing to Get Traction in Craft Beer and Spirit False Advertising Claims That “Handmade” or “Craft” is a Misleading Term in the Context of Alcohol Labels ** . . .                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

By: Brent E. Johnson                                                                                                                                                                   

Plaintiff lawyers have recently set their site on beer and spirits manufacturers claiming that terms used in advertising such as “handcrafted”, “handmade” or the imprimatur of “craft beer” are being used misleadingly by mass producers.  Several defendants have been successful to date in having the cases dismissed on the pleadings.  In Nowrouzi v. Maker’s Mark Distillery, Inc., No. 14CV2885 JAH NHS, 2015 WL 4523551, at *1 (S.D. Cal. July 27, 2015), plaintiffs allege that they purchased Maker’s Mark Bourbon because its label contained the statement that it was “handmade,” which allegedly led plaintiffs to believe the spirit “was of superior quality” than other bourbon (thus justifying spending more for defendant’s product than other bourbons).  Unsurprisingly, Maker’s Mark bourbon is made with machines.  In a similar action (bought by the same Plaintiff firm) In Welk v. Beam Suntory Imp. Co., No. 15CV328-LAB JMA, 2015 WL 5022527, at *1 (S.D. Cal. Aug. 21, 2015). plaintiffs allege they were misled by the word “handcrafted” on Jim Beam Bourbon bottle labels.  In each case plaintiffs sued under the usual tripartite in California: the CLRA (Cal. Civ. Code § 1750 et seq.); FAL (Cal. Bus. & Prof. Code § 17500 et seq.; and UCL (Cal. Bus. & Prof. Code § 17200 et seq.).  In both cases the district court dismissed with prejudice finding that the use of the impugned terms “handmade” and “handcrafted” were non-actionable puffery.  Those terms were generalized, vague, statements and it was unreasonable to imbue in them that the product literally was created by hand without any involvement of equipment or automated process.  This reasoning follows a Florida case with respect to Jim Beam where the court dismissing with prejudice held that “no reasonable person would understand ‘handmade’ in this context to mean literally by hand. No reasonable person would understand ‘handmade’ in this context to mean substantial equipment was not used.”  Salters v. Beam Suntory, Inc., 2015 WL 2124939 (N.D.Fla. May 1, 2015).

That said, not all Defendants have been so lucky – a few plaintiffs have navigated their way out of the pleading stage.  In Aliano v. Louisville Distilling Co., LLC, No. 15 C 00794, 2015 WL 4429202 (N.D. Ill. July 20, 2015), plaintiffs argued that Angel’s Envy Rye Whiskey, which is described in advertising as “hand crafted” and “small batch” was mass-produced and thus deceptive.  The court permitted the Illinois Consumer Fraud and Deceptive Trade Practices Act case to proceed.  It distinguished Salters noting that Angel’s Envy was a much smaller brand and a consumer could reasonably believe the phrase “hand crafted” on the finished whiskey label meant it was not mass-produced.  In Hofmann v. Fifth Generation, Inc., No. 14-CV-2569 JM JLB, 2015 WL 5440330, at *8 (S.D. Cal. Mar. 18, 2015), the court deferred on this same question refusing to dismiss the complaint against the makers of Tito’s Handmade Vodka, stating that as a matter of law it could not make the determination that the reasonable consumer would not be misled.

A couple of similar cases in this area are currently pending.  In Parent v. MillerCoors LLC., No. 15-cv-01204-GPC-WVG (S.D. Cal.), MillerCoors is being sued on an allegation that its 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.  Plaintiff claims that the definition of “craft beer” set forth by the Brewer’s Association, a not-for-profit trade association, governs.  While it is undisputed that MillerCoors does not qualify as a “Craft Brewer” pursuant to those guidelines, Miller has moved to dismiss on the basis that such guidelines are not controlling.  Miller has also moved on the basis that the use of the words “craft” and “crafted” in their advertising are colorful and vague – i.e. mere puffery – and not actionable.

Pepper Purchaser Problems

Direct Competitor Lawsuit, Multi-Panel Litigation, Slack Fill Suit, , , , , ,

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

By: Brent E. Johnson                                 

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.

Update on California Supply Chain Slavery Law

Transparency in Supply,

**California Law (Cal. Civ. Code § 1714.43) Requires Disclosure by Large Retailers of Their Efforts Regarding Human Slavery and Trafficking in Their Global Supply Chains** . . .                                                                                                                                                                                                                                                                                                                                                          

By: Brent E. Johnson                                                                                                               

Starting in 2012 large retailers (sellers and manufacturers) who do business in California have been required to comply with the California Transparency in Supply Chains Act of 2010, which requires retailers doing business in California to make specific disclosures on its website about efforts it makes to “eradicate slavery and human trafficking from its direct supply chain.” (Cal. Civ. Code § 1714.43).  The Act applies to “retail seller” or “manufacturer” . . . “doing business in California” . . . that has annual worldwide “gross receipts” that exceed $100,000,000.  The Transparency Act requires, at a minimum, disclosure of what actions the company is taking, if any, in five areas: (1) Engaging in verification of product supply chains to evaluate and address risks of human trafficking and slavery, specifying if the verification was not conducted by a third party; (2) Conducting audits of suppliers to evaluate compliance with company standards for trafficking and slavery in supply chains, specifying if the verification was not an independent, unannounced audit; (3) Requiring direct suppliers to certify that materials incorporated into the product comply with the laws regarding slavery and human trafficking of the country or countries in which they are doing business; (4) Maintaining internal accountability standards and procedures for employees or contractors failing to meet company standards regarding slavery and trafficking; and (5) Providing company employees and management, who have direct responsibility for supply chain management, training on human trafficking and slavery, particularly with respect to mitigating risks within the supply chains of products.  The disclosures are to be posted on the company’s website with a “conspicuous and easily understood link” to the required information on the website’s homepage (and if the company does not have a website, consumers are to be provided the written disclosures within 30 days of receipt of a written request.  The Transparency Act itself does not have a private right of action provision – it is clear: “[t]he exclusive remedy for a violation of this section shall be an action brought by the Attorney General for injunctive relief” (Cal. Civ. Code § 1714.43(d)).

FDA Issues Not so Kind Letter to Nut Bar Maker

FDA, Warning Letter,

Arrangement of Useful Granola Bars with Muesli, Nuts, Dried Apricots and Bowl of Honey closeup on Black Stone background. Top View

**Food and Drug Administration Moves on Kind Bars to Force Them to Remove “Healthy” Labels** . . .                                                                

By: Brent E. Johnson                                                                                                                                                                                                                        

The KIND® company makes a range of snack bars sold under the tag line “ingredients you can see & pronounce” – primarily manufactured with nuts, grains and dried fruit.  While to the casual observer such foods would be considered “healthy,” the Food and Drug Administration (FDA) has asked the company, pursuant to 21 U.S.C. § 343(r)(1)(A) to remove any mention of the term  from its packaging and website (as well as the “+” symbol).  See Warning Letter.  The basis for the FDA’s action is that the term “healthy” and the symbol “+” have specifically defined meanings when they are applied to food labeling.  According to 21 CFR 101.65(d)(2), the term “healthy” means that the food has a number of objective health measures, for example, the food must have saturated fat content of 1 g or less and must have no more than 15 percent of the calories from saturated fat (see also 21 CFR 101.62(c)(2)).  The FDA asserts that certain Kind Bars, such as their Fruit & Nut Almond & Apricot, Fruit & Nut Almond & Coconut and Fruit & Nut Dark Chocolate Cherry Cashew + Antioxidants all contain at least twice the base amount of saturated fat and all had more than 15% in total of their caloric measure in saturated fat.  Notably, the “+” symbol is also regulated.  According to 21 CFR 101.54(e), “+” can only be used where the food has at least 10 percent more of the Reference Daily Intake (RDI) of the nutrient value of specific baseline reference foods.  According to the FDA, the Kind Bars do not contain that reference adjacent to the “+” sign on their labels.    Many nutritionists have sided with Kind stating that the regulation limiting saturated fats should exclude such fats from nuts because they are inherently healthful.  Kind’s public statement appears however, to suggest they are complying with the mandate of the warning letter.