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.

Container Size Speaks Volumes in a Lanham Act Case

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

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

By: Brent E. Johnson .

Cardboard Boxes Balancing on a Seesaw

We’ve blogged about the rise in slack-fill consumer class actions and, specifically, the numerous actions brought against McCormick and Company for allegedly under filling its red, white and blue pepper tins. These lawsuits were consolidated and transferred to the United States District Court for the District of Columbia in December 2015. Curiously, one individual action initially brought in Minnesota federal court was allowed to come along for the ride – and it was this single-plaintiff lawsuit that started the avalanche of consumer actions against McCormick. “Who was the plaintiff?” you ask. McCormick’s competitor, Watkins, Inc., claiming a Lanham Act violation for the alleged slack-fill in McCormick’s pepper tins. Watkins filed its complaint on June 9, 2015, and a week later, the consumer class actions started cascading downhill.

Lanham Act cases are very different beasts from consumer class actions even though they both focus on alleged misrepresentations made to consumers. In a Lanham Act lawsuit, the competitor is trying to collect lost profits (or disgorgement of the defendant’s profits) due to “a false or misleading representation of fact” in “commercial advertising or promotion.” 15 U.S.C. § 1125(a)(1). In a consumer class action, on the other hand, the class representative is trying to recover for the class either the entire purchase price of the product or the “price premium” class members paid for it based on the misrepresentation under state statutes and common law.

Slack-fill cases, of course, do not involve words – rather, they focus on the size of the package. As the FDA elucidates: “A container that does not allow the consumer to fully view its contents shall be considered to be filled as to be misleading if it contains nonfunctional slack-fill. Slack-fill is the difference between the actual capacity of a container and the volume of product contained therein. Nonfunctional slack-fill is the empty space in a package that is filled to less than its capacity.” 21 C.F.R. § 100.100(a). In McCormick’s case, it sought dismissal of Watkin’s complaint on the theory (among others) that a container’s size is not “commercial advertising and promotion” because no words are involved”, citing Farah v. Esquire Magazine, 736 F.3d 528, 541 (D.C. Cir. 2013), where the court concluded that the Lanham Act only applies to “commercial speech.”

In this case of first impression – there are no other reported cases of one competitor suing another over slack-fill – Judge Ellen Segal Huvelle was not buying what McCormick was selling: “McCormick argues that size of its pepper tins is not commercial speech, but it is difficult to understand how the size of a package or container could possibly not be considered a form of ‘advertising or promotion.’ The size of a package signals to the consumer vital information about a product and is as influential in affecting a customer’s choices as an explicit message on its surface.” Memorandum Opinion, MDL Docket No. 2665, Misc. No. 15-1825 (ESH) (October 17, 2016). The court analogized package size to other non-verbal advertising, such as images appearing on a product’s container. In sum, like Depeche Mode, Judge Huvelle concluded that “words are very unnecessary” to make out a Lanham Act claim.

No Pay, No Play

August 24, 2016Class Settlement, Consumer Class Action, FDA, Settlement ObjectorsAttorney Fees, California, class action suits, fairness hearing, false advertising, FDA, labeling, objectors

** District Court Rejects Settlement Deal That Extracts a Broad Release of Claims But Provides No Money to Class Members **

By: Brent E. Johnson

Pay writing on Keyboard

It is not common for judges to reject class settlements, usually because lawyers for the opposing sides — putting aside their adversary roles — are savvy enough not to give the judge cause. That was not the case recently, however, in a long running homeopathic product false advertising case in the Southern District of California. Allen v. Similasan Corp., No. 12-CV-376-BAS-JLB, 2016 WL 4249914, at *1 (S.D. Cal. Aug. 9, 2016).

The allegations in this case, which are similar to those of other recent homeopathy cases (see e.g., Nat’l Council Against Health Fraud v. King Bio Pharms., 107 Cal. App. 4th 1336, 1348 (2003); Herazo v. Whole Foods Mkt., Inc., No. 14-61909-CIV, 2015 WL 4514510, at *1 (S.D. Fla. July 24, 2015); Conrad v. Boiron, Inc., No. 13 C 7903, 2015 WL 7008136, at *1 (N.D. Ill. Nov. 12, 2015)) complain that Similasan engaged in false advertising by omission by not including on its products’ labels statements to the effect that (i) the product was not FDA approved as medically effective and (ii) the active ingredients were diluted. Notably, neither of those disclaimers is required on homeopathic products – but even so, many companies voluntarily include them.

In Similasan, after four years of hard fought litigation the Defendant had successfully narrowed the claims by summary judgment [Dkt. No. 142] and Plaintiffs had certified a class [Dkt. No. 143]. Similasan, however, filed a motion to decertify, arguing that Plaintiffs would not be able to prove materiality or falsity with their expert witnesses’ survey evidence [Dkt. No. 164]. With the motion to decertify pending, the parties settled and sought judicial approval of their agreement [Dkt. No. 196]. But the settlement was not a cure the district court could swallow. Judge Bashant noted her role in the fairness hearing was to look for “subtle signs that class counsel have allowed pursuit of their own self-interests and that of certain class members to infect the negotiations.” (2016 WL 4249914, at *3 citing In re Bluetooth Headset Prods. Liab. Litig., 654 F.3d 935, 947 (9th Cir.2011)). In this case, the signs were not subtle, and it was not a close call for the Court to deny approval.

In particular, Judge Bashant took exception to the following features of the proposed agreement:

The remedy for the unnamed class was injunctive relief only. While the company agreed to add the disclaimers that Plaintiffs’ counsel had complained were omitted, Similasan was not required to compensate class members;
The only money went to the class representatives who would pocket $2,500.00 each and Plaintiff’s counsel who secured a clear-sailing agreement which would permit an award of fees in excess of $550,000.00;
In exchange for injunctive relief, class members released Similasan from all claims identified in the complaint;
The release covered a nationwide class even though the Court had certified a California class only.

These settlement terms were not good enough for the Court. The class was being asked to give up the right to sue but receiving nothing in return. Indeed, to the extent the remedy was an injunction, a class member who opted out would receive the same benefit without forfeiting any rights. Tellingly, eight State Attorneys General (Arizona, Arkansas, Louisiana, Michigan, Nebraska, Nevada, Texas and Wyoming) filed an amicus curiae brief urging the Court to reject the proposed settlement. [Dkt. No. 219].

The Court also discussed the role that notice (or lack thereof) played in its decision making. The Court observed that the proposed class would have been in the tens of thousands [Dkt. No. 216], but the settlement notice prompted only 136 views of the settlement information website and 21 phone calls to the settlement hotline. The Court attributed this lackluster response to the weakness of the notice, which consisted of a single ad in USA Today and some incidental online placements. But the reality is the paucity of the economic return (i.e. zero) likely resulted in mass indifference.

MillerCoors Over the Moon

July 12, 2016Alcohol Labeling, Consumer Class ActionConsumer Class Action, craft beer, false advertising

** Brewer prevails against Blue Moon “Craft Beer” false advertising suit **

By: Brent E. Johnson

Craft beers in different bottles.

We’ve blogged in the past about the raft of consumer class actions hitting beer and spirits makers – particularly lawsuits targeting manufacturers with claims that terms such as “handcrafted” or “handmade” are misleading if used by companies employing typical mass-production methods. For example in Parent v. MillerCoors LLC., No. 15-cv-01204-GPC-WVG (S.D. Cal. May 30, 2015), MillerCoors – maker of that campus staple, Keystone Light (among a host of other brews) — was sued based on the premise that it’s 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.

On October 26, 2015, the court granted MillerCoor’s first motion to dismiss. Dkt No. 17.

The court found that a reasonable consumer was not likely to be deceived by Defendant’s representations because MillerCoors’ use of the “Artfully Crafted” trademark was mere puffery. Id. at 12–16. The court also rejected Plaintiff’s argument that Blue Moon’s “placement among other craft beers” in retail stores was deceptive because Plaintiff did not allege, and provided no factual allegations from which the court could reasonably infer, that MillerCoors had any control over where retailers place Blue Moon on their shelves. Id. Plaintiff was given leave to amend, however, which he did, focusing his amended argument on the definition of “craft beer” set forth by the Brewer’s Association (and in various common dictionaries) providing that a “craft beer” connotes a beer made by traditional or non-mechanized means. Dkt No. 19. Plaintiff also alleged that the price differential between Blue Moon and comparable non-craft beers was, itself, a representation that the beer was superior.

The court rejected these arguments and dismissed the second amended complaint — this time with prejudice. Parent v. Millercoors LLC, No. 3:15-CV-1204-GPC-WVG, 2016 WL 3348818, at *6 (S.D. Cal. June 16, 2016). Again, the court considered MillerCoors’ Blue Moon advertising, as far as it pertains to representations about “craft beer,” as non-actionable puffery. Id. ([T]he “advertisements contain ‘generalized, vague, and unspecified assertions’ that amount to ‘mere puffery upon which a reasonable consumer could not rely.’”) Further, the court rejected Plaintiff’s argument that the price of a product can constitute a representation or statement of product quality. Id. (citing Boris v. Wal-Mart Stores, Inc., 35 F. Supp. 3d 1163, 1169 (C.D. Cal. 2014) (finding that the price of a migraine medication did not constitute a representation or statement about the product that could support consumer claims against a retailer under the UCL, CLRA, or FAL)).

Our takeaway: Drink what you like. Beer snobbery will get you nowhere.

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.

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.

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.

Hitting Back at Class Settlement Objectors

December 10, 2015Class Settlement, Settlement Objectorsclass settlement, false advertising, objectors, sanctions

**Plaintiff Class Counsel Seek Sanctions Against Alleged “Lawyer-Driven” Objections to its Becks Beer Settlement**

By: Brent E. Johnson

Plaintiff’s Class Counsel have been successfully using the threat of sanctions to ward off late game class objectors. See prior post. Another recent case has highlighted the issue. In 2013 Beck’s Beer was sued under the theory that it’s packaging claims such as “originated in Germany” with “German quality” and “export bier” implied that the beer was a German import. And certainly while that was true at one time, after 2008 the Beck’s Beer label was sold to the Belgian brewer Interbrew which later merged with American giant Anheuser Busch – and production of the beer moved to the U.S (in fact Beck’s Beer is brewed in the same facility as the synonymous American: Budweiser). Plaintiff’s sued on allegations of false advertising and a class settlement was reached in June 2015: the settlement allowed a maximum award of $50 per household (less for those consumers without proof of purchase). Marty v. Anheuser-Busch Companies, 1:13-cv-23656-JJO (S.D. Fl. June 18, 2015) ECF No. 149. The class settlement was capped at $20 million and the attorneys’ fees were set at $3.5 million. Id. Class member Rene Muller (through his counsel Stephen Field) filed a settlement objection – claiming, generally, that the settlement terms were inflated and that attorney fees were too high. Id. at ECF No. 161 (September 29, 2015). The Court considered the objection, held a fairness hearing and overruled the objections. Id. at ECF No. 171 (October 22, 2015). It then granted final settlement approval. Id. at ECF No. 172 (October 22, 2015). Class counsel however were not satisfied – they took the deposition of Muller who (class counsel alleges) revealed that he generally knew nothing about the case, or the settlement, or his objection and was interested merely in a payoff (similar to a payoff he had received in a previous class action objection). Id. at ECF No. 174 (November 12, 2015). As such – class counsel sought sanctions against Muller’s attorney Stephen Field under 28 U.S.C. § 1927 which provides that: “[a]ny attorney . . . who so multiplies the proceedings in any case unreasonably and vexatiously may be required by the court to satisfy personally the excess costs, expenses, and attorneys’ fees reasonably incurred because of such conduct.” Id. Essentially, class counsel has argued that the only rational explanation for the objectors threadbare knowledge of his objection – was that the attorney Stephen Field put him up to it – in hope of a hefty settlement. Id. Field has opposed the Motion for Sanctions, amongst other things, noting the inherent irony of Plaintiff’s class counsel (who seek to get paid to settle suits) asking for sanctions against him for doing inherently the same thing. Id. at ECF No. 177 (November 30, 2015). The matter of sanctions is currently under advisement.