Consumer Class Action

No Standing for NFL Superbowl Ticket Class Action Representatives

February 7, 2016Article III Standing, Consumer Class Action, UncategorizedArticle III standing, class action representative

the beginning of a football match

** Third Circuit Affirms That Purported Class Representative Super Bowl Ticket Buyers Do Not Have Standing To Sue For NFL Ticket Practices That “Forced” Them to Buy Scalped Secondary Market Tickets **

By: Brent E. Johnson

In 2014 a purported class action representatives purchased tickets to the 2014 Super Bowl held at the Meadowlands Stadium in New Jersey – at a price of $2,000.00 each (even though their face value was around $800.00). Finkelman v. Nat’l Football League, No. 15-1435, 2016 WL 158507, at *1 (3d Cir. Jan. 14, 2016). Plaintiff alleged that the NFL distributed 99% of tickets to teams, sponsors and the media and that the shortage of general public tickets caused the inflated price. Id. He further alleged that New Jersey’s Consumer Fraud Act (N.J. Stat. Ann § 56.8-35.1) in particular the provisions that make it unlawful to withhold more than 5% of tickets to an event from the general public – was violated by the NFL’s ticket allocation practices. Id. Plaintiff sued on the theory that this alleged violation of New Jersey law caused him to miss out on a face value ticket and thus forced him onto the inflated secondary market – with the difference between the two prices being his “injury.” Id. On the NFL’s motion to dismiss, however, the District Court agreed that there was no Article III standing. Id. The Third Circuit affirmed – outlining that Article III requires a fairly traceable injury – i.e. “but for” causation – and the court could not say that but for the NFL’s restrictions Plaintiff still would have been able to buy a face value ticket. Indeed, the court said that “demand for Super Bowl tickets so far exceed

s supply that [Plaintiff’s] probability of obtaining a face-price ticket in a public sale would have been effectively nil regardless of the NFL’s ticketing practices.” Id. at *8. Further, the court disagreed that it could determine whether the high market price was caused by the NFL – “[t]o state the problem succinctly: we have no way of knowing whether the NFL’s withholding of tickets would have had the effect of increasing or decreasing prices on the secondary market . . . [w]e can only speculate—and speculation is not enough to sustain Article III standing.” Id. at 10. A second purported class representative did not buy a ticket to the Super Bowl – his allegation was that he was dissuaded from doing so because of the high resale price – and that lost opportunity was his “injury”. Id. at *6. This position on standing was treated with greater incredulity by the Third Circuit – the court concluding that Plaintiff’s lack of standing is not a hard call: “[i]f the Court were to credit [plaintiff’s] concept of injury, everyone who contemplated buying a Super Bowl ticket but decided against it would have standing to bring a claim under the Ticket Law. Article III is simply not that expansive.” Id. With no standing – to either purported class representative – the Third Circuit affirmed the dismissal.

The Injunction Conundrum

January 10, 2016Article III Standing, Consumer Class Action, False AdvertisingArticle III standing, class certification, false advertising, Injunction, Rule 23, UCL

** Courts Are Inconsistently Grappling With the Question of Whether a Plaintiff Has Standing for an Injunction Prohibiting Misleading Behavior if They are Aware of the Behavior ** . . .

By: Brent E. Johnson

An interesting catch-22 exists with respect to injunctive relief in purported consumer class actions in federal court. If a plaintiff discovers misleading conduct (for example a mislabeled product), her basis for an injunction would be – relief from the company misleading her again! But if the plaintiff is aware of the false advertising, is it plausible that she would be misled in future? To quote the old chestnut – “fool me once, shame on you – fool me twice, shame on me.” By affirmatively pleading the elements of the misleading conduct, doesn’t a plaintiff inherently disqualify herself from the standing required to seek an injunction in federal court? This is the argument that won the day in the recent Yakult case in the Central District of California. Plaintiff in that case, Nicolas Torrent, sued on the allegation that Yakult’s probiotic beverages that claim to have beneficial cultures which “balance [the] digestive system” are misleading because (according to Plaintiff) there is no credible scientific evidence that the probiotics do what Yakult says they do. Torrent v Yakult U.S.A. Inc., No 8:15-cv-00124-CJC-JCG (C.D. Cal Jan. 27, 2015) (“By definition, healthy people already have a stable digestive health balance of trillions of intestinal bacteria. Yakult, contrary to what defendant advertises, cannot make a healthy person more healthy in terms of digestive health or otherwise.”) Plaintiff claimed that Yakult violated California’s Unfair Competition Law (UCL) (Cal. Bus. & Prof. Code § 17200 et seq.) and that he was entitled to restitution and injunctive relief. Id. at ECF No. 32, Second Amended Compl. ¶¶ 14 – 16. Curiously, though, by the time of the motion for class certification, Plaintiff dropped his demand for restitution or money damages and only asserted a claim for injunctive relief. Id. at ECF No. 41, Pl.’s Mot. for Class Cert. ¶ 4. With only the injunction at issue, the lawsuit became a test case of sorts. In answering the question, the district court was clear that plaintiff did not have standing as there was “[in]sufficient likelihood that [he] will be wronged in a similar way.” Id. at ECF No. 52, Order (January 5, 2016) citing Los Angeles v. Lyons, 461 U.S. 95, 111 (1983); O’Shea v. Littleton, 414 U.S. 488, 495-96 (1974) (“Past exposure to illegal conduct does not in itself show a present case or controversy regarding injunctive relief … if unaccompanied by any continuing, present adverse effects.”) The court noted the split within the Central District of California on the standing issue (see In re ConAgra, 302 F.R.D. 537, 573 – 76 (C.D. Cal. Aug. 1, 2014) (collecting cases)) and acknowledged the counter-argument that to deny injunctive relief would upset the enforcement of the UCL – but ultimately decided that it was not the courts’ place to carve out Article III standing exceptions for consumers. Order at 6 – 8. On that basis, Rule 23 class certification was denied. Highlighting the split on this standing issue, a district court in Illinois just a few days later held the opposite. Leiner v. Johnson & Johnson Consumer Co., Inc., No. 15-c-5876, (N.D. Ill. Jan. 12, 2016). In this case. plaintiff claimed that Johnson & Johnson violated the Illinois Consumer Fraud and Deceptive Business Practices Act by labeling and advertising two “Baby Bedtime Bath products” as “clinically proven” to help babies sleep better – when it allegedly knew the products hadn’t been clinically proven to have that effect. Plaintiff sought to represent a class of Illinois purchasers. The Illinois court aligned itself with courts that have held that consumers don’t forfeit standing by knowing the basis of their claims observing that, without an exception, consumers could never avail themselves of injunctive relief.

Do Payment Providers Have to Accommodate Everyone?

January 4, 2016Consumer Class Action, UnruhCalifornia, Unruh

** Discrimination Class Action filed in California Alleging That Payment Providers such as Square and PayPal Violated Unruh law for Refusing to Process Merchant Payments for Merchant’s Risky Transactions ** . . .

By: Brent E. Johnson

Payment processors such as Square, Inc. and PayPal, Inc have opened up a new world for merchants who can now easily and inexpensively accept payments online and/or by credit card from anyone – anywhere. The platform, however, is not open to all-comers: the companies have strict policies on what sort of merchants or transactions they will accept – and those that they will not. For example, Square’s User Agreement prohibits merchants from using their accounts to accept payments for anything “illegal” – but it also prohibits a range of activities that may be legal but raise the risk profile for anyone involved (including the payment processor) such as transactions involving mail order drugs, gambling, firearms, adult material, hate products and drug paraphernalia. PayPal, Inc’s Acceptable Use Policy is similar, it prohibits using an account for activities that violate any law – but also legal (but legally risky) transactions such as get- rich-quick-schemes, lotteries, sexually orientated material, firearms and offshore banking. Plaintiff counsel in California have bought a purported class action alleging that such business regulations are “discrimination” under California’s civil rights statute (Cal. Civ. Code §§ 51 – 52) (aka “Unruh”). Abu Maisa Inc., v Flint Mobile Inc., No. 3:15-cv-06338 (N.D. Cal. December 31, 2015) ECF No. 1. In particular their named plaintiff is a convenience store owner, who, it is alleged, was dissuaded from using Square and PayPal (and other payment providers Flint Mobile, Google, Intuit and Stripe) because plaintiff’s store sells “banned” items such as adult magazines and lottery tickets. The case is an unusual one, in so far as Unruh cases are typically bought by plaintiff’s who have been discriminated against on the basis of some sort of disability or recognized protected classification (not just on the basis that a plaintiff was denied the right to, in this case, sell adult magazines). Plaintiff appear to have a hard road ahead of him. Notwithstanding the broad sweep of Unruh, California courts recognize that businesses may discriminate amongst customers in order to comply with legal requirements or protect business reputation (Harris v. Capital Growth Inv’rs XIV, 805 P.2d 873, 884 (Cal. 1991)) – as long as those regulations are rationally related to the services performed and the facilities provided. Marina Point, Ltd. v. Wolfson, 640 P.2d 115, 124 (Cal. 1982). For example, a rental car company can “discriminate” on the basis of age because of the risks involved in renting cars to younger drivers. Lazar v. Hertz Corp., 82 Cal. Rptr. 2d 368, 373 (Cal. Ct. App. 1999). Similarly, financial companies can make risk-oriented decisions regarding what customers to deal with and on what terms. Flower v. Wachovia Mortgage FSB, No. C 09-343 JF HRL, 2009 WL 975811, at *6 (N.D. Cal. Apr. 10, 2009). Courts uniformly “decline to second-guess [the defendant’s] business judgment.” Desert Healthcare Dist. v. PacifiCare FHP, Inc., 114 Cal.Rptr.2d 623 (Cal. Ct. App. 2001); Semler v. Gen. Elec. Capital Corp., 127 Cal. Rptr. 3d 794, 798 (Cal. Ct. App. 2011).

False Advertising to the Dogs

December 10, 2015Consumer Class Action, Direct Competitor Lawsuit, False Advertising, Multi-Panel Litigationcertification, class settlement, fairness hearing, false advertising

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

By: Brent E. Johnson

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

Natural Tobacco?

November 10, 2015All Natural Litigation, Consumer Class ActionAll Natural, class action suits

**Class Action Bid in Florida Against “Natural” Tobacco Maker Accused of Falsely Advertising the Natural Benefits of its Products** . . .

By: Brent E. Johnson

Past “All Natural” class action suits, see prior post, cover various products but the plaintiffs’ allegations are the same – the consumers were allegedly duped because they believed the products labeled “natural” were healthier for them. Surely, this logic cannot apply to cigarettes — a product consumers have known for decades to have very little, if any, redeeming health qualities? Hence, can plaintiff’s counsel allege with a straight face that his client bought Santa Fe Natural Tobacco Company cigarettes for their health and safety? That is the question raised by the complaint bought in the United States District Court, Southern District of Florida in Sproule v. Santa Fe Natural Tobacco Co., No. 0:15-cv-62064-JAL (October 14, 2015). Certainly a case to watch.

Honest-ly: All Natural

October 24, 2015All Natural Litigation, Consumer Class ActionAll Natural, certification

**Jessica Alba’s Honest Company the Latest Target in California of the All Natural Plaintiff Class Action Bar in cocamidopropyl betaine case ** . . .

By: Brent E. Johnson

Honesty and related virtues on a product box or package for instant reputation building, including sinerity, trustworthiness, honor, candor and integrity

The “All Natural” conundrum is yet to be solved. The latest target is The Honest Co. – the celebrity driven purveyor of baby and cleaning products. Rubin v. The Honest Company, Inc., 3:15-cv-04036-EDL (N.D. Cal. September 3, 2015). The complaint touts a familiar trope – that defendant’s products with “natural” labeling actually have some artificial or synthetic ingredients. In this case (inter alia) the allegedly offending ingredient is cocamidopropyl betaine. A scary sounding ingredient – and one that sounds artificial. In reality, it is a compound derived from coconut oil. Courts have been consistent that scary sounding names aside, just because an ingredient is manufactured or extracted does not make it “un-natural.” See Pelayo v. Nestle USA, Inc., 989 F. Supp. 2d 973, 978 (C.D. Cal. 2013) (holding that the “reasonable consumer is aware that Buitoni Pastas are not springing fully-formed from Ravioli trees and Tortellini bushes”); Balser v. Hain Celestial Group, Inc., CV 13–05604–R, 2013 WL 6673617 (C.D. Cal. Dec. 18, 2013) (dismissing without leave to amend a complaint involving a product line of over 30 “natural” shampoos and cosmetics, because “shampoos and lotions do not exist in nature, there are no shampoo trees, cosmetics are manufactured . . . [t]hus Plaintiffs cannot plausibly allege they were deceived to believe shampoo was existing in or produced by nature”); Kane v. Chobani, Inc., 973 F.Supp.2d 1120, 1137 (N.D. Cal. 2014) (rejecting outright the assertion that fruit or vegetable juices were “highly processed unnatural substances far removed from the fruits or vegetables they were supposedly derived from and in fact were more akin to synthetic dyes like coal tar dyes”); see Rooney v. Cumberland Packing Corp., 2012 WL 1512106 (S.D. Cal. Apr. 16, 2012) (dismissing without leave to amend a complaint alleging that “Sugar in the Raw” was deceptive because it was actually processed and not natural sugar). Thus ingredients with “un-natural” names like sodium bicarbonate, citric acid and glycerin have been held to be natural and thus not misleading. See, respectively, Astiana v. Dreyer’s Grand Ice Cream, Inc., No. C-11-2910 EMC, 2012 WL 2990766, at *1 (N.D. Cal. July 20, 2012) (noting that sodium bicarbonate is a non-synthetic alkalizing agent); Ries v. Arizona Beverages USA LLC, No. 10-01139 RS, 2013 WL 1287416, at *1 (N.D. Cal. Mar. 28, 2013) (granting summary judgment to defendant on question of whether citric acid in iced tea was natural, and defendant’s expert testimony that citric acid is a natural ingredient); Brazil v. Dole Packaged Foods, LLC, No. 12-CV-01831-LHK, 2014 WL 6901867, at *5 (N.D. Cal. Dec. 8, 2014) (same); Thurston v. Bear Naked, Inc., 2013 WL 5664985, at *7–8 (N.D.Cal. July 30, 2013) (holding, at class certification stage, plaintiff not entitled to proceed with claim that reasonable consumer would “view the presence of glycerin . . . as contrary to 100% Natural statement on label”). A number of other cosmetic companies have been hit with cocamidopropyl betaine claims – including Neutrogena (4:12-cv-00426-PJH (N.D. Cal)), Johnson & Johnson (3:13-cv-00524 (D.N.J.)). These matters settled.

That Settling Feeling – Private Settlement of Auto-Renewal Cases in California

October 20, 2015Auto-Renewal Law, Class Settlement, Consumer Class ActionAuto-Renewal Law, California, class action suits, private settlement

payment

**Many high profile companies have had California Bus. & Prof. Code § 17600 Auto Renewal cases bought against them recently – from Spotify to Tinder – the trend among these companies has been to settle – and settle privately**

By: Brent E. Johnson

In December 2010, California entered into effect its Auto-Renewal Law (“ARL”) (California Bus. & Prof. Code § 17600 et seq) intended to protect consumers from unwanted charges for ongoing subscription fees, i.e. such as those used by online subscription services. The law does not outlaw the practice of auto-renewal altogether, however it creates an onus on subscription services to present auto-renew terms in a “clear and conspicuous manner”; to obtain affirmative consent to payment terms; and to provide an easy-to-use mechanism for cancelation. See § 17602. The ARL creates a novel (and as yet judicially untested): if the consumer doesn’t give the affirmative consent required by the statute, the “the goods, wares, merchandise, or products shall for all purposes be deemed an unconditional gift . . . .” See § 17603. With the popularity of the subscription service business model in the new economy, it was probably inevitable that Plaintiff lawyers would pick up on this law as a basis for purported consumer class action suits. As listed below, most of the big name online subscription companies – in media, data, shopping and dating – have been targeted. The majority response to date, has been to settle – quickly and privately.

In Vemma Nutrition’s case (D. Cal Case No. 3:13CV02731) the ARL complaint was filed 11/14/2013 and on 5/20/2014 a joint motion to dismiss under Rule 41 ended the case.
As to Spotify the case against it initially bought in the Superior Court, San Francisco County CGC-13-535309 was removed to Federal Court. (N.D. Cal) 3:13-cv-05653-CRB on 12/6/2013 and on 7/16/2014 a joint motion to dismiss under Rule 41 was filed.
With Dropbox the case filed Superior Court, San Francisco County, No. CGC-14-537731 was removed to Federal Court. (N.D. Cal) 3:14-cv-01453-CRB on 3/28/2015 and on 6/27/2014 a stipulated dismissal
In the case filed against Tinder (C. D. Cal. Case No. 2:15-cv-03175) in response to the Complaint filed 4/28/2015, the matter was voluntarily dismissed on 7/21/15
For Defendants American Automobile Association (D. Cal. Case No. 3:15-cv-00246) with respect to the complaint filed 2/6/2015 the matter was voluntarily dismissed on 3/23/15.
LifeLock’s case filed 2/2/2015 (D. Cal. Case No. 3:15-cv-00220) was voluntarily dismissed 5/11/15.
As to Blizzard Entertainment (D. Cal. Case No. 3:15-cv-00230) the complaint filed 2/5/2015 was voluntarily dismissed on 8/3/2015
The Birchbox case (S.D. Cal. Case No. 3:15-cv-00498) is currently stayed pending mediation.

The trend here is, first, get out of state court! California state rules mandate judicial approval (and thus public disclosure) of the private settlement of a purported class action – even in its pre-certification infancy. Cal. Rules of Court S 3.770; see Cal. Prac. Guide Civ. Pro. Ch. 14-C, Cal. Civ. Prac. Procedure § 32:18, see discussion Pirjada v. Superior Court, 134 Cal. Rptr. 3d 74, 81-82 (Cal. Ct. App. 2011). This generally prevents a truly confidential settlement. However, in Federal Court, only a certified class settlement needs court approval. See Rule 23(e); Eckert v. Equitable Life Assurance Soc’y, 227 F.R.D. 60, 62 (E.D.N.Y. 2005); see also Wasserman, Secret Class Action Settlements, 31 Rev. Litig. 889, 901 (2012). And if the parties can agree prior to an Answer being filed – all the better – the dismissal itself does not need court approval. Rule 41(a)(1)(A)(i); Commercial Space Mgmt. Co., Inc. v. Boeing Co., Inc., 193 F.3d 1074, 1077 (9th Cir. 1999); Bailey v. Shell W. E&P, Inc., 609 F.3d 710, 719 (5th Cir. 2010). The second trend here is obvious – early – private settlement.

That’s not to say that Defendants are not coming out swinging. One litigation trend is for Defendants to use the arbitration provision in their terms and conditions to force the case out of court. In this vein Guthy-Renker’s case in Superior Court, Los Angeles County BC499558, the defense has moved to compel arbitration – a hearing on the motion to compel is 10/19/2015. In the case of Hulu, Superior Court, Los Angeles County BC540053 on 8/11/2015 the court entered an order to compel arbitration – this is currently under appeal.

Not surprisingly behemoths Google and Apple have also both been sued under the ARL. Neither seem content to settle and are both actively defending the cases. See Mayron v. Google, Inc., Superior Court, Santa Clara County 1-15-CV-275940 demurrer filed 7/20/2015, hearing scheduled for December 4, 2015; see also Siciano v. Apple, Superior Court, Santa Clara County 1-13-CV-257676 on 4/20/2015 the Court overruled Apple’s demurrer and the case is set for case management conference on November 13, 2015.

Phantom Discounts Hurting Retailers

October 15, 2015Consumer Class Action, Phantom DiscountsCalifornia, FAL, standing, UCL

**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.)).

Safe Harbor for Vodka

October 3, 2015Alcohol Labeling, Consumer Class Action, Safe Harbor DefenseFDA, puffery, Safe Harbor Defense, TTB

**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

September 30, 2015Consumer Class Action, Pre-Certification, SettlementFDA, pre-certification, Rule 12(b)(6)

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.