False Advertising

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 **

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.

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).

Turning Tide on the Whole Nation as a Viable Class?

July 11, 2016Certification, Consumer Class Action, False Advertisingcertification, CLRA, Consumer Class Action, false advertising, UCL

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

By: Brent E. Johnson

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

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

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

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

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

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

Long Term Effects of Tobacco II

June 27, 2016Certification, Consumer Class Action, False Advertisingascertainability, California, certification, CLRA, Consumer Class Action, false advertising, Ninth Circuit, UCL

** A Return to the Limits of In Re Tobacco II? Courts Find That Not Every Advertisement is Part of a “Long-Term Campaign” **

By: Brent E. Johnson

London, England - May 20, 2016: Packets of Various Old Cigarette Boxes from the 1970's

We normally don’t blog about unpublished decisions because . . . lack of precedential value and all that . . . . and that may turn out to be the case with the recent California Court of Appeal’s opinion in Santamarina v. Sears Roebuck & Co., B246705, 2016 WL 1714226, at *1 (Cal. Ct. App. Apr. 26, 2016) and the Ninth Circuit’s memorandum decision in Haskins v. Symantec Corp., No. 14-16141 (9th Cir. June 20, 2016). But these decisions are simply too good for us to pass up the opportunity to post about them – particularly for those who represent clients being sued under California’s CLRA or UCL based on foggy claims of consumer fraud. Invariably, a defendant bringing a Rule 9(b) motion to dismiss or opposing class certification based on the putative class representative’s inability to identify the false advertisements she relied on will be met with the plaintiff’s invocation of the “long-term advertising campaign” language in In re Tobacco II Cases (Tobacco II), 46 Cal. 4th 298 (2009) – the salve that heals all reliance deficiencies.

Of course, Tobacco II dealt with a class representatives’ allegations of “a decades-long campaign of deceptive advertising and misleading statements about the addictive nature of nicotine and the relationship between tobacco use and disease.” 46 Cal. 4th at 306 (emphasis added.) Which is no exaggeration, Joe Camel was R.J. Reynolds’ pitchman for a decade — although it seemed much longer — and the Marlboro Man rode shotgun for Philip Morris for almost half a century. Based on that allegation, the California Supreme Court held, “[W]here . . . a plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements.” Id. at 328. Despite the limited nature of this ruling, plaintiffs who have no idea what advertisements they may have seen frequently claim that the defendant engaged in a “long-term [false] advertising campaign.” Id.

Courts have shown varying degrees of willingness to go along with this class representative claim, particularly at the pleading and class certification stages. Those that do, often quote this language from Tobacco II: “The substantive right extended to the public by the UCL is the right to protection from fraud, deceit and unlawful conduct, and the focus of the statute is on the defendant’s conduct.” 46 Cal 4th at 324. Courts accepting the “long-term advertising campaign” excuse for the plaintiff’s inability to identify the advertisements he relied on tend to read Tobacco II as a judicial declaration that the UCL and CLRA are primarily punish-the-defendant statutes and only secondarily consumer protection laws.

But in Santamarina – a case involving “Made in the USA” advertising by Sears for its Craftsman® tools – the California Court of Appeal scaled back the expansive readings of Tobacco II by other California courts. In Santamarina, the putative class representatives were able to identify the specific advertising and labeling on which they relied so standing was not at issue as it was in Tobacco II. In addition, falsity and materiality were not in dispute given California law on “Made in the USA” claims. Moreover, discovery in the case apparently showed that Sears understood that “Made in the USA” was a valuable sales claim and internal marketing studies demonstrated that a significant percentage of consumers believed Craftsman® tools were made in the United States.

Despite the above, the Court of Appeal concluded that plaintiffs could not establish commonality or that the proposed class was ascertainable. Notably, the plaintiffs defined the class as “All persons who purchased, in the State of California from January 6, 2001 through the present, any Craftsman branded tool or product where any unit or part thereof was entirely or substantially made, manufactured, or produced outside of the United States.” The Court of Appeal agreed with the superior court that this definition doomed the proposed class under commonality and ascertainability requirements because the proposed class included consumers who never saw any Craftsman® “Made in the USA” advertising or labeling. The Court of Appeal responded to plaintiffs’ incantation of Tobacco II by holding, “Given that the time period at issue was several years, and only some Sears advertising and marketing could potentially be found to be false or misleading, substantial evidence supported the trial court’s finding that the advertising at issue here is not equivalent to the decades-long campaign in Tobacco II.” Particularly important are these words: “In contrast to the evidence here, Tobacco II ‘involved identical misrepresentations and/or nondisclosures by the defendants made to the entire class.’” Santamarina, 2016 WL 1714226, at *10 (citing Kaldenbach v. Mutual of Omaha Life Ins. Co. (2009) 178 Cal.App.4th 830, 849.

For being designated as an unpublished opinion, the California Court of Appeal’s decision in Santamarina is unusually expansive in its analysis – covering 34 pages. In contrast, Haskins v. Symantec is the soul of wit. In a mere two paragraphs, the Ninth Circuit upheld the district court’s dismissal of a putative class action complaint alleging that Symantec failed to warn consumers that hackers had compromised the 2006 version of its ubiquitous Norton antivirus software. The plaintiff claimed, among other things, that she relied on Symantec’s advertising that its software was secure (when it allegedly wasn’t) in buying it – without identifying the specific advertising. The Ninth Circuit affirmed the district court’s dismissal under Rule 9(b) “[b]ecause Haskins’s complaint did not allege that she read and relied on a specific misrepresentation by Symantec.” In response to the plaintiff’s predictable invocation of Tobacco II, the Ninth Circuit found that the plaintiff “failed to establish that the Tobacco II standard is applicable to her pleadings because the misrepresentations at issue here were not part of an extensive and long-term advertising campaign like the decades-long campaign engaging in saturation advertising targeting adolescents in Tobacco II.”

Two cases do not a trend make — especially when California law is involved. But it is encouraging to see courts – even in unpublished decisions – return Tobacco II to its stated limits rather than assuming that any and every advertisement is part of a long-term campaign.

Sugar By Any Other Name Not Just As Sweet – Says FDA

June 10, 2016False Advertising, FDA, FoodCalifornia, class action suits, consumer action, false advertising, FDA, labeling, Ninth Circuit

** FDA concludes its study on “Evaporated Cane Juice” – issues guidance that it is a misleading description for mere Sugar **

By: Brent E. Johnson

Candy shop at local bazaar in Barcelona, Spain.

On May 25, 2016, the Food and Drug Administration (FDA) issued guidance that it is false or misleading to describe sweeteners made from sugar cane as “evaporated cane juice.” Guidance for Industry: Ingredients Declared as Evaporated Cane Juice.

The FDA promised guidance before the end of 2016 – so they under-promised and over-delivered. The FDA’s guidance reasoned that the term “cane juice”— as opposed to cane syrup or cane sugar—calls to mind vegetable or fruit juice, see 21 CFR 120.1(a), which the FDA said is misleading as sugar cane is not typically eaten as a fruit or vegetable. See U.S. Department of Agriculture, Center for Nutrition Policy and Promotion. “Added Sugars.” As such, the FDA concluded that the term “evaporated cane juice” fails to disclose that the ingredient’s “basic nature” is sugar. Guidance, Section III. As support, the FDA cited the Codex Alimentarius Commission — a source for international food standards sponsored by the World Health Organization and the United Nations — which defines “raw cane sugar” in the same way as “evaporated cane juice.” Codex 212-1999.1. The FDA therefore advised that “‘evaporated cane juice’ is not the common name of any type of sweetener and should be declared on food labels as ‘sugar,’ preceded by one or more truthful, non-misleading descriptors if the manufacturer so chooses.” Guidance, Section III. The FDA’s decision comes after a 2009 draft guidance advising against using the term “evaporated cane juice” and a host of lawsuits against food companies that ignored the guidance. Draft Guidance for Industry: Ingredients Declared as Evaporated Cane Juice (2009).

The FDA’s decision does not bode well for pending cases on this point. As we have blogged about recently, many evaporated cane juice lawsuits are currently stayed awaiting the outcome of the FDA’s guidance, see, e.g., Gitson, et al. v. Clover-Stornetta Farms, Inc., Case No. 3:13-cv-01517-EDL (N.D. Cal. Jan. 7, 2016); Swearingen v. Amazon Preservation Partners, Inc., Case No. 13-cv-04402-WHO (N.D. Cal. Jan. 11, 2016). And some have been revived on appeal – just in time – see Kane v. Chobani, LLC, No. 14-15670, 2016 WL 1161782, at *1 (9th Cir. Mar. 24, 2016) (overturning 2014 order from Northern District of California dismissing case). These suits (and others) are now set to proceed in the wake of the FDA’s guidance. Bear in mind, the guidance is not binding on courts and, in of itself, does not create a private right of action. 21 U.S.C. § 337(a) (“[A]ll such proceedings for the enforcement, or to restrain violations, of [the FDCA] shall be by and in the name of the United States”); see POM Wonderful LLC v. Coca-Cola Co., 573 U.S. ___ (2014); Buckman Co. v. Pls.’ Legal Comm., 531 U.S. 341, 349 n.4 (2001); Turek v. Gen. Mills, Inc., 662 F.3d 423, 426 (7th Cir. 2011); see also Smith v. U.S. Dep’t of Agric., 888 F. Supp. 2d 945, 955 (S.D. Iowa 2012) (holding that there is no private right of action regarding USDA statute).

In most false advertising cases, the governing test is what consumers, themselves, think – not what the FDA does. For example, in Mason v. Coca-Cola Co., plaintiffs alleged that “Diet Coke Plus” was misleading because the word “Plus” implied the product was “healthy” under FDA regulations. 774 F. Supp. 2d 699 (D.N.J. 2011). The court begged to differ: “At its core, the complaint is an attempt to capitalize on an apparent and somewhat arcane violation of FDA food labeling regulations . . . not every regulatory violation amounts to an act of consumer fraud . . . . It is simply not plausible that consumers would be aware of [the] FDA regulations [plaintiff relies on].” Id. at 705 n.4; see also Polk v. KV Pharm. Co., No. 4:09-CV-00588 SNLJ, 2011 WL 6257466, at *7 (E.D. Mo. Dec. 15, 2011); In re Frito-Lay N. Am., Inc. All Natural Litig., No. 12-MD-2413 RRM RLM, 2013 WL 4647512, at *15 (E.D.N.Y. Aug. 29, 2013) (“[T]he Court [cannot] conclude that a reasonable consumer, or any consumer, is aware of and understands the various federal agencies’ views on the term natural.”) Defendants in evaporated cane juice cases often assert that “evaporated cane juice” is a more accurate term than sugar to describe a type of sweetener that is made from sugar cane but undergoes less processing than white sugar. See e.g., Morgan v Wallaby Yogurt Company, No. CV 13-0296-CW, 2013 WL 11231160 (N.D. Cal, April 8, 2013) (Mot. to Dismiss). Those issues aside, many commentators believe the guidance will spur settlements – and they may be right. The guidance may also spur a round of label changes for those who have not already abandoned the controversial term.

Class Actions And Taxes in New Jersey

April 22, 2016Consumer Class Action, False Advertising, TCCWNAclass action suits, consumer protection statute, New Jersey, TCCWNA, Third Circuit

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

By: Brent E. Johnson

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

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

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

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

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

Shocked, shocked to find that [Yogurt] is going on in here!

March 9, 2016False Advertising, Injunctive ReliefArticle III standing, California, class certification, Consumer Class Action

** Purported Class Representative Loses Second Bite at Yoghurt Certification After Court Accuses Him of “Manufacturing” Standing **

By: Brent E. Johnson

“I Will Never Buy It Again” . . . “Just Kidding.” We’ve posted about a recent trend in consumer class action litigation: denying standing for injunctive relief to putative class representatives who claim false advertising due to the fact that these would-be class representatives are now unlikely to be misled in a similar way in the future. In Torrent v. Yakult USA, Plaintiff Nicolas Torrent claimed he bought Yakult’s probiotic yogurt drink due to beneficial digestion claims – which he claims was misleading. Torrent confirmed his utter disdain for Yakult’s yogurt in interrogatory responses: as a result, on January 7, 2016, the District Court for the Central District of California denied class certification, in part, due to Torrent’s lack of standing for injunctive relief. Torrent v Yakult U.S.A. Inc., No 8:15-cv-00124-CJC-JCG (C.D. Cal Jan. 27, 2015) (Dkt 52). “Because Torrent has not even alleged that he intends to buy Yakult in the future, let alone submitted evidence to that effect, the Court concludes that he lacks Article III standing to pursue injunctive relief here.” Id. Ten days later, Torrent bought a couple of bottles of Yakult and shortly thereafter filed a renewed motion for class certification. Id. at Dkt. 53. If brevity is the soul of wit, the motion is Louis C.K. “Plaintiff intends to purchase Yakult in California in the future.” The Court was having none of it, observing that Torrent either knew he intended to buy Yakult when he filed his initial motion for certification (but told the court the contrary) or his subsequent purchase of the yogurt and declaration he intended to buy even more (never mind the allegedly false advertising) “appears to be an effort to manufacture standing in direct response to this Court’s prior ruling.” Id. (March 7, 2015) (Dkt. 65). Torrent’s claims for injunctive relief – based on his “manufactured” evidence – akin to Captain Renault in Casablanca claiming to be “shocked, shocked to find that gambling is going on in here!” (while the croupier hands him a pile of money] – fell on deaf ears.

No Parm, No Foul?

February 25, 2016False Advertising, FDA, FoodCalifornia, Class Acton Suit, FDA, Food Adulteration, Misbranding, New York

** Class actions Filed Following Bloomberg Reports of Cellulose Filling in Parmesan Cheese **

By: Brent E. Johnson

Two putative class action lawsuits have been filed over cellulose in parmesan cheese – one in federal court in New York against Wal-Mart (Moschetta v. Wal-Mart Stores, Inc., S.D.N.Y., No. 16-13770) and one in the Northern District of California against the newly merged Kraft Heinz group (Lewin v. Kraft Heinz Foods Co., 316-cv-00823). Plaintiffs’ counsel wasted no time filing their lawsuits after Bloomberg Business published a February 16, 2016 online article regarding the common practice of cheese makers adding cellulose (plant pulp) to grated parmesan cheese. Bloomberg had various brands of grated parmesan tested by an independent laboratory and reported the results of at least some of those tests — Essential Everyday 100% Grated Parmesan Cheese sold by Jewel-Osco tested at 8.6% cellulose, Wal-Mart’s Great Value 100% Grated Parmesan weighed in at 7.8% cellulose, and the ubiquitous Kraft 100% Grated Parmesan Cheese registered 3.8%. Some grated parmesan makers list cellulose as an ingredient on their labels as an additive “to prevent caking.” The FDA has no specific regulations regarding the amount of cellulose in grated cheeses (and most other foods), and it is a common food additive — cutting calories (it’s non-digestible), reducing fat content, and providing a source of dietary fiber.

While it is unclear what prompted Bloomberg to commission the lab tests, they came in the wake of a federal criminal prosecution of the now-defunct Castle Cheese Inc. and its CEO, Michelle Myrter, on food adulteration and misbranding charges. Castle Cheese, however, was a different beast altogether where the problem was not only the addition of cellulose, but the fact that its parmesan cheese did not contain any parmesan at all (rather, a combination of Swiss, white cheddar, Havarti, and mozzarella – sometimes from the rinds). A ex-employee blew the whistle on Castle, which was investigated by the FDA in 2014. Castle declared bankruptcy shortly thereafter.

The U.S. parmesan business seems beset on all sides by detractors. The Italian Parmigiano Reggiano Consortium recently published the results of a consumer survey it commissioned that purportedly showed that Americans who viewed a package of parmesan cheese that “recalled” an Italian flag believed that Italy was the country of origin for that cheese and, even in less suggestive packaging, 38% of those surveyed believed the cheese to have been made in Italy. The Italian consortium is taking its complaint that U.S. consumers are being duped into buying parmesan they believe is made in Italy to Brussels in the hope that they will be dealt with in the Transatlantic Trade and Investment Partnership trade agreement (T-TIP). Currently, cheese makers are prevented under European Union protected designations of origin regulations (“PDOs”) from labeling their cheeses as parmesan if they are not made by dairies in Parma, Reggio Emilia, Modena and parts of the provinces of Mantua and Bologna. If this regulation was “imported” into the US, would the millions of 4-17 year olds who dump the off-white powder onto their noodles take note?

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.