CLRA

Are You Shipping Me! Is Delivery Charging The Next Big Thing In Consumer Class Actions?

May 9, 2017Consumer Class ActionCalifornia, CLRA, Consumer Class Action

** Shipping and Handling Case Dismissed in California – Beginning of the End? **

Lately, there’s been quite a bit of buzz over a couple of lawsuits filed in California alleging that internet retailers are charging too much for shipping and handling: Reider v. Electrolux Home Care Products, Inc., No. 8:17-cv-00026-JLS-DFM (C.D. Cal) and McCoy v. Omaha Steaks International, Inc., No. BC 658076 (Cal. Sup. Ct, L.A. Cnt’y). Much of the reporting on these cases focuses on the possibility that this claim may be the next big thing in consumer class actions. How likely is that?

The answer, of course, is “Who knows?” But a closer inspection of the lawsuits suggests that this litigation too shall pass — and perhaps quickly. First, both lawsuits were filed by Scott J. Ferrell, the founder of Pacific Trial Attorneys, who is no stranger to consumer class actions against online retailers having brought several under California’s Automatic Renewal Statute. California Business and Professions Code §17600, et seq. But there hasn’t yet been a break out of these shipping and handling cases. And second, the Electrolux action is over via a joint stipulation to dismiss filed just yesterday after the District Court granted Electrolux’s motion to dismiss with the observation that any attempt to amend would likely be futile. Dkt. No. 30, May 8, 2017.

The plaintiff in Electrolux pursued a novel theory of liability in a case where it was undisputed that he was apprised of the shipping charges prior to purchase. Indeed, there was no way plaintiff could have missed the disclosure because he had to actually choose between shipping options with different charges at the time of purchase: Ground Service at $7.99; Second Day Air at $15.00; and Next Day Air at $25.00. (He judiciously chose ground service given his purchase was for a $1.99 vacuum bag.) Faced with those facts, plaintiff honed in on the unfair prong of California Business & Profession Code § 17200, which prohibits and makes actionable “unlawful, unfair or fraudulent” business practices.

While California courts have not addressed the unfair prong in consumer lawsuits, the Ninth Circuit has – holding that for a business practice to be unfair to consumers it must either: (1) violate a “legislatively declared” policy; or (2) fail a balancing test that weighs the benefit to the company against the harm to consumers. Lozano v. AT&T Wireless Servs., Inc., 504 F.3d 718, 736 (9th Cir. 2007). In Electrolux, the plaintiff argued that the guidelines of the Direct Marketing Association (“DMA”) that encourage retailers to make sure that their shipping and handling charges bear a reasonable relationship to the actual costs of shipping and handling and a 1980 FTC consent order prohibiting a car dealer from charging more than its actual costs in shipping cars to its showroom reflect a public policy against excessive shipping and handling charges and show that the balance tilts to consumers.

The District Court disagreed. Dkt. No. 27, April 21, 2017. The “legislatively declared” policy was an easy call – neither the DMA nor the FTC are legislatures. On the balancing test, the District Court found that there was simply no harm to the plaintiff and, therefore, nothing against which to balance Electrolux’s benefit. Striking a blow for free markets everywhere, the court observed, “Online shoppers are aware that online merchants are in the business of making money and generating profit, and those looking for the best deals will find their way to the merchants who offer the best combination of quality, price, and service.” In what should become known as the “Mini Bar Rule,” the court cited Searle v. Wyndham Int’l, Inc., 102 Cal. App. 4th 1327, 1330 (2002) – a case where plaintiffs unsuccessfully challenged a hotel chain’s mandatory 17% service charge:

“Perhaps the best analogy is the one made in Searle. The hotel room guest knows he could buy the $3 minibar candy for less at a neighborhood store. Perhaps he pays the high price so he can stay in his comfortable robe and enjoy the high-priced, in-room movie. In any event,“[t]he minibar patron, like the room service patron, is given both clear notice the service being offered comes at a hefty premium and the freedom to decline the service.” Searle, 102 Cal. App.4th at 1334.” (Dkt. No. 27 at 6).

The District Court in short order dispatched plaintiff’s Consumer Legal Remedies Act claim that the practice of charging inflated shipping and handling fees is deceptive because consumers believe that the charges are reasonably related to the company’s actual costs by noting that Electrolux makes no such representation.

But what of the second shipping and handling charge case — McCoy v. Omaha Steaks International, Inc., CA Sup. Court, County of Los Angeles, Case No. BC 658076? That case was filed in Los Angeles Superior Court on April 14, 2017 – a week before the District Court’s decision in Electrolux. The claims are the same. The support is the same. We’ll have to wait and see if the superior court and the federal court agree.

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.

Here’s Something You Don’t See Every Day: Poliitcal Support for the Primacy of State Law

March 21, 2016Arbitration, Class WaiverArbitration, Class Waiver, CLRA

** Federal Agencies and Legislators Attempt an Assault on the Enforceability of Class Action Waivers and Mandatory Arbitration Contract Provisions **

By: Brent E. Johnson

x93vP26g_400x400 We’ve recently posted regarding the pushback state high courts have been giving the Supreme Court’s recent decisions regarding the primacy of the Federal Arbitration Act over state laws that restrict private arbitration agreements. These state court cases arise in circumstances (such as in consumer cases) where the high cost/low recovery dynamic makes the class action attractive versus the consumer pursuing an individual claim in arbitration. The concern over the increased use of mandatory arbitration agreements – particularly those providing class waivers – extends beyond state courts and to the federal government itself. But unlike the states, who must accept federal pre-emption of state law, the feds can work around it – and they are (trying, at least). For example, the Department of Education has just released a proposal to amend the federal regulations governing colleges’ participation in the Direct Loan Program. The proposed amendments would prevent colleges participating in the lucrative program from requiring students to arbitrate unless they consent after the claim arises; and from prohibiting students from asserting their claims “in cases filed in a court on behalf of a class.” Department of Education, Issue Paper 5 Session 3: March 16-18, 2016. These proposed regulations stem in part from a citizen petition filed by a consumer group, Public Citizen, Inc and comes in the wake of some high profile for-profit college failings, especially the infamous 2014 bankruptcy of Corinthian Colleges, one of the largest for-profit, post-secondary school operators in the country (housing Bryman College, National Institute of Technology, etc.) The Department of Education is justifiably concerned that taxpayers are on the hook for Direct Loans made to students who attended Corinthian Colleges’ campuses from 2010-2015 (to the tune of $3.5 billion according to Public Citizen).

The Department of Education’s proposal comes on the heels of the Consumer Fraud Protection Bureau’s announcement in October that it is considering proposed rules to eliminate mandatory arbitration provisions in consumer finance agreements. Dodd-Frank tasked the CFPB with conducting a study of arbitration agreements in consumer finance contracts, which was completed in March 2015. Among the study’s insights was that, based on a sampling of consumer finance agreements, 53% of those involving credit cards, 44% of debit cards, 92% of prepaid cards, and 99% of payday loans and wireless contracts contained mandatory arbitration clauses. The study also disclosed that, while “a relatively small number of individual cases against their financial service providers [were filed] either in arbitration or in court” in the aftermath of Concepcion, prior to that Supreme Court decision, “at least 32 million class members per year were eligible for relief pursuant to class settlements approved by federal courts between 2008 and 2012” resulting in settlements of “$540 million per year in cash, in-kind relief and attorneys’ fees and expenses . . . .” The CFPB concluded that the dramatic decline in consumer finance disputes was the direct result of the rise of mandatory arbitration agreements – the individual harm is too small for a consumers to bring a claim, lawyers won’t take on such small cases, and “in some cases consumers may not know that they have suffered harm” (presumably because a lawyer hasn’t informed them).

But the biggest challenge to mandatory pre-dispute arbitration agreements in consumer contracts comes from Congress, itself. In what some readers might view as an ironic title for federal legislation — “The Restoring Statutory Rights and Interests of the States Act of 2016” was introduced by Senators Leahy (D. VT) and Franken (D. MN) on February 4th. This bill would effectively “overrule” Concepcion (specifically referenced in the text) and its progeny by decreeing that FAA preemption does not apply to claims brought by an individual or “small business concern” – including class actions – arising from a Federal or state statute . . . or a constitution of a State.” Not satisfied with merely protecting state statutory claims (e.g., California’s Consumer Legal Remedies Act) from pre-dispute arbitration agreements, the proposed legislation goes further by providing that state statutory or common law on unconscionability, contract formation, and public policy trumps the FAA as well. Senator Leahy and Franken’s 2016 legislation appears aimed at garnering Republican support by specifically referencing state rights. In 2015, Senator Franken along with Representative Hank Johnson reintroduced their prior bill, “The Arbitration Fairness Act” that was a full federal frontal assault on arbitration agreements, eliminating them in employment, consumer, civil rights and antitrust cases. The Arbitration Fairness Act was referred to the House and Senate Judiciary Committees from whence it is unlikely to emerge. The Restoring Statutory Rights and Interests of the States Act is unlikely to fare much better, but it is an election year and worth a watch.

Safe Harbor From Murky Waters in the Supply Chain

December 22, 2015Safe Harbor Defense, Transparency in SupplyCalifornia, CLRA, FAL, Supreme Court, Transparency in Supply Chains Act, UCL

seafood

**Nestle Defends Class Action in the Central District of California with Successful Motion to Dismiss and Sets Valuable Precedent With California Transparency in Supply Chains Act Safe Harbor Defense** . . .

By: Brent E. Johnson

The California Transparency in Supply Chains Act of 2010, 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). In our prior post on this topic we noted the Transparency Act applies to large retailers (those with $100 million in worldwide sales). Id. And that the Transparency Act’s focus is on information – the retailer must disclose what efforts it takes to: verify the risks of human trafficking and slavery in its supply chain; audit its suppliers; certify its suppliers’ compliance with laws regarding slavery and human trafficking; maintain internal policies and procedures on the subject; and train its management on these policies and procedures. Id. Important to note, the Act does not require that a retailer actually do any of these things – the mandate is to inform the public what efforts are made. The point of the Transparency Act is consumer empowerment – to give consumers who are concerned about the topic a point of reference – and ultimately give the market the ability to reward or punish retailers who are (or are not) doing enough. Nestle USA was one of the first companies to be tested by the Plaintiffs’ bar on whether the Transparency Act created more than an obligation to inform the public about its efforts to eradicate the problem – and whether there is an implied legal obligation to inform the public about the actual occurrences or risk in its supply chain of human slavery or trafficking. See Barber v. Nestle USA, Inc., No. SACV1501364CJCAGRX, (C.D. Cal.). The case involved Nestle USA’s branded pet food which sources seafood from Thai fisheries. The court took judicial notice that it has been reported widely the Thai fishing industry is notorious for having widespread forced and other inhumane labor practices. Plaintiffs alleged that they would not have purchased Nestle USA’s products if they knew of that connection and therefore that the defendant had violated California’s CLRA (Cal. Civ. Code § 1750 et seq.); FAL (Cal. Bus. & Prof. Code § 17500 et seq.; and UCL (Cal. Bus. & Prof. Code § 17200 et seq.). However, Nestle USA cited to its compliance with the Transparency Act – to the fact that it had informed the public of its efforts – and therefore that it was squarely within a consumer law “safe harbor.” A “safe harbor” is the concept articulated by the California Supreme Court that a defendant cannot be liable under the UCL for unlawful conduct if it is doing something that “the Legislature has permitted . . . or considered a situation and concluded no action should lie.” Cel-Tech Comms., Inc. v. L.A. Cellular Tel. Co., 20 Cal. 4th 163, 182 (Cal. 1999.). The doctrine has been applied widely to California consumer laws. Alvarez v. Chevron Corp., 656 F.3d 925, 933–34 (9th Cir. 2011) (applying the safe harbor doctrine to CLRA claims); Pom Wonderful LLC v. Coca Cola Co., No. CV 08-06237 SJO(FMOx), 2013 WL 543361, at *5 (C.D. Cal. Apr. 16, 2013) (applying the safe harbor doctrine to FAL claims). Nestle USA argued that Plaintiffs could not make an end run around the legislature by making it liable for disclosures that were fully compliant with the Transparency Act. The district court agreed holding that Plaintiff may not “simply impose their own notions of the day as to what is fair or unfair” – that the “California Legislature considered the situation of regulating disclosure by companies with possible forced labor in their supply lines and determined that only the limited disclosure mandated by § 1714.43 is required.” Barber v. Nestle USA, Inc., No. SACV1501364CJCAGRX, 2015 WL 9309553, at *4 (C.D. Cal. Dec. 9, 2015). Accordingly, it granted Nestle USA’s motion to dismiss. Id.

This dismissal sets an important precedent for the defense bar: Costco has been sued in the Northern District of California under similar circumstances with respect to its sale of seafood sourced from Thailand. Sud. v. Costco Wholesale Corp., No. 3:15-cv-03783 (N.D. Cal). Costco’s Motion to Dismiss is currently pending. Chocolate manufacturers have faced similar lawsuits with respect to slave and child labor in the cocoa supply chain: Mars has been sued in the Central District of California (Wirth v. Mars, Inc., No. 8:15-cv-1470 (C.D. Cal September 10, 2015) and in the Northern District (Hodson v. Mars, Inc., No. 4:15-cv-04450-DMR (N.D. Cal. September 28, 2015). Hershey’s has also been sued in the Northern District of California (Dana v. The Hershey Company, No. 3:15-cv-04453 (N.D. Cal. September 28, 2015). Mars’ Motion to Dismiss has been filed in its cases and a decision is currently pending.

Craft, Draft or Daft?

September 1, 2015Alcohol Labeling, Consumer Class ActionCLRA, craft beer, FAL, puffery, UCL

**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.