August 2017

Publicity Rights Don’t Apply To Non-Celebrities?

Vinci v. Spokeo
Dismissed (without prejudice) – Data Brokers BeenVerified, Instant Checkmate, Intelius, and Spokeo allegedly used plaintiffs’ names in paid search advertising (e.g., Google, Bing, etc.) without plaintiffs’ knowledge or consent. Defendants allegedly used dynamic keyword insertion to allow an individual’s name to be included in paid search ads. If the ad was clicked, a user would be taken to a Data Broker page where information about that individual (or individuals with a similar name) could be purchased. Plaintiffs claimed they were not customers of defendants, and never provided permission to use their likenesses in defendants’ advertising. Claims were filed under the Illinois Right of Publicity Act (IRPA).

The court found that use of plaintiff’s names were insufficient to identify them as individuals, since neither alleged they had “celebrity or public status” that allowed them to be identified by name only. However, the court declined to rule the dynamically configured (but otherwise generic) ads were exempt under the IRPA, finding (i) using a person’s identity to draw attention to a product could alone be an infringement, and (ii) the IRPA’s definition of ‘commercial purpose’ was broad enough to include infringements absent allegations of an endorsement or false endorsement.

The ruling applies to four putative class actions in the Northern District of Illinois:
[Dobrowolski v. Intelius – 1:17-cv-01406]
[Dobrowolski v. Instant Checkmate – 1:17-cv-01446]
[Vinci v. BeenVerified – 1:17-cv-01447]
[Vinci v. Spokeo – 1:17-cv-01519]
jbho: a novel case. Similar to BIPA, the IRPA (765 ILCS 1075) allows for $1,000 in statutory damages per violation. Not sure if plaintiffs will be able to cure deficiencies in their identity arguments, but the courts did seem to leave the door open. However, the court did state that whether a name (either alone or in combination with other factors) was sufficient to identify an individual, was a fact-based inquiry. So that could be used to defeat any attempt to certify a class.

Also of interest, the court ruled it had no jurisdiction over Intelius – a Delaware corporation – since plaintiff failed to sufficiently allege that the activity was Illinois-related. Plaintiff only alleged that ads could be configured to target Illinois, but failed to produce evidence of such targeting. The fact the nationwide service was available in Illinois, on its own, was insufficient to establish personal jurisdiction in Illinois. It would seem that simple discovery would be sufficient to show whether defendants’ campaigns were configured to be geo-targeted. But, it looks like plaintiffs will have to do that elsewhere.


No Blueberries In Blueberry Donuts

Grabowski v. Dunkin
Class complaint – Dunkin’ Donuts allegedly sold products as ‘Blueberry’ despite the fact they contained no actual blueberries, and only inferior ingredients such as sugar and com syrup, along with gums and artificial food coloring used to mimic the texture, shape, and color of actual blueberries

Plaintiff claimed he paid a premium for ‘Blueberry’ products, since blueberries are one of the richest sources of antioxidant phytonutrients, and have the potential to limit the development and severity of certain cancers and vascular diseases, including atherosclerosis, ischemic stroke, and neurodegenerative diseases of aging. Plaintiff also claimed he would buy the ‘Blueberry’ products in the future, if they were reformulated to contain actual blueberries.
[N.D. Ill; 1:17-cv-05069]
jbho: these ones always puzzle me. I don’t think people go to Dunkin’ Donuts looking for health food.

Note that this mirrors a similar case in California (Saidian v. Krispy Kreme C.D. CA; 2:16-cv-08338) where plaintiff alleged Chocolate Iced Raspberry Filled doughnuts didn’t contain real raspberries. After Krispy Kreme was denied a motion to dismiss (plaintiff plausible alleged the product was misleadingly labelled), the case was voluntarily dismissed without explanation (Doc #34).

July 2017

Soaps and Lotions Not So Pure?

Paul v. Beaumont Products (d/b/a Clearly Natural Essentials)
Class complaint – Beaumont allegedly marketed its Clearly Natural Essentials products as ‘Clearly Natural’ and ‘Pure and Natural’ despite the fact they contained artificial and synthetic ingredients. Plaintiffs claimed these ingredients included: Sodium Citrate, Tocopherol Acetate, Decyl Glucoside, Cetyl Alcohol, Phenoxyethanol, Sodium Chloride, Ethylhexylglycerin and Glycerin.

Plaintiffs claimed they would not have paid a premium price for Clearly Natural Essentials had they understood the true nature of the products.
[C.D. CA: 8:17-cv-01225]
jbho: another test of an as yet under-regulated term. Plaintiffs alleged Glycerin was one of the artificial ingredients, but all the products in the complaint are clearly labelled as “Glycerine Soap/Lotion.” 
It will also be interesting to see if the ‘Clearly Natural’ language will be considered an objectively provable claim, since ‘Clearly Natural’ has been part of the product’s name since 2012 (Registation No. 4240294). Puffery/Company Pride? or requires substantiation? Stay tuned. 

BTW: Also interesting is the allegation that Sodium Chloride is a “synthetic and hazardous chemical substance.” Somebody alert the Food Network.

$9 Million Settlement For Natural & Health Claims

Townsend v. Blue Diamond
$9M settlement – Blue Diamond allegedly marketed its Almond Breeze and Nut Thins products as ‘All Natural’ despite the fact they contained synthetic ingredients. Plaintiffs further alleged Blue Diamond deceptively labeled sugar as ‘evaporated cane juice.’ Finally, plaintiffs claimed Almond Breeze misleadingly advertised products with high almond content as healthy, and used the American Heart Association’s (AHA) ‘Heart Check-Mark’ symbol without proper authorization.

Highlights include:

  • $8,995,000 settlement fund
    • $7,500,000.00 for Almond Breeze products
    • $1,495,000.00 for Nut-Thins products
  • $1 – $10 for each class member
    • $1.00 per unit for up to 5 units of Almond Breeze products WITHOUT Proof of Purchase
    • $1.00 per unit for up to 10 units of Almond Breeze products WITH Proof of Purchase
    • $1.00 per unit for up to 5 units of Nut-Thins products WITHOUT Proof of Purchase
    • $1.00 per unit for up to 10 units of Nut-Thins products WITH Proof of Purchase
  • $31,000 for class representatives
    • $5,000 for each Almond Breeze class representative (2)
    • $3,000 for each Nut-Thin class representative (7)
  • $2,933,570.00 for class counsel (30% of settlement fund)

In addition to the cash settlement, Almond Breeze agreed to:

  • Remove ‘All Natural’ claims from product packaging and advertising
    • but can use the term ‘natural’ in ingredient lists, in accordance with FDA regulations
  • Remove ‘evaporated cane juice’ from the list of ingredients
  • Remove the AHA ‘Heart Check-Mark’ symbol from product packaging and advertising, unless the product has been properly certified
  • Change the phrase ‘Made from Real Almonds’ on Almond Breeze products to ‘Made with Real Almonds’
  • Remove the image of two hands holding almonds from product packaging

[Washington Co. (AR) Circ. Ct.; 14-958-4]
jbho: good idea to make sure any natural or health claims are supported by appropriate testing, and perhaps verified by an independent 3rd party.

Note that FDA guidance has clarified it considers the term ‘evaporated cane juice’ to be misleading since it suggests that the sweetener is derived from fruit or vegetable juice, and does not reveal that the ingredient is essentially sugar.

Note also that a similar action alleging Almond Breeze products contained synthetic and artificial ingredients and chemical preservatives was recently stayed in federal court pending the results of this trial (Harlam v. Bleu Diamond – E.D. N.Y.; 1:15-cv-00877). It will be interesting to see what happens there.

Veggie Straws More Straw Than Vegetable?

Solak v. Hain Celestial (d/b/a Sensible Portions)
Class complaint – Sensible Portions allegedly marketed its ‘Veggie Straws’ as healthy and nutritious, facts contradicted by the actual nutrition content of the snacks. Plaintiffs claimed that despite images of whole potatoes, tomatoes, and spinach on product packaging, the product contained only “highly processed byproducts” of those vegetables – potato starch, potato flour, corn starch, tomato paste and spinach powder – that “lack(ed) the nutritional value of their whole vegetable counterparts.”
veggie straws
Plaintiffs claimed they would not have purchased the Veggie Straws had the had known the true whole vegetable content, nutritional and health qualities of the product.

Claims were filed under New York and California UDAP & False Advertising Laws.
[N.D. N.Y.; 3:17-cv-00704]
jbho: hmmm. Seems pretty obvious to me that a processed snack is unlikely to contain fresh vegetables. It will likely be tough to prove no “garden grown” or “ripe” vegetables made it to the final product, even if the nutrients were processed out. I haven’t seen the entirety of the packaging, but a website mentioned in the complaint does state ‘made with.’ Nonetheless, if the product doesn’t contain the raw ingredients, plaintiff may have a case.

For my TCPA readers: plaintiffs are represented by Sergei Lemberg. As a fan, I’ll definitely be watching this one.

Never-ending Discount Not Really A Discount

Seegert v. Luxottica
Class complaint – Lens Crafters (owned by Luxottica) allegedly used continuously running “xx% Off Lenses with Frame Purchase” promotions to inducing consumers to purchase products with misleading discounts. Plaintiff claimed she purchased a pair of prescription lenses for $179.00 (original price $298.34). Upon investigation, she claimed she discovered the lenses were “never offered for sale or sold at the $298.34 price, nor were they offered for sale or sold at that price within the 90-day period immediately preceding.”

Plaintiff alleged the quoted ‘regular price’ for prescription lenses – which was listed only on customer receipts – had never been charged. Plaintiff further alleged these ‘regular prices’ did not reflect the prevailing market retail price within the three months immediately preceding the promotion (as required under California law), and Lens Crafters did not sell a substantial quantity of prescription lenses for a reasonable period of time (as required by the FTC).
[S.D. CA; 3:17-cv-01372]
jbho: yet another accusation of deceiving consumers into:
1) making purchases they otherwise would not have made, or
2) paying substantially more for merchandise that it’s actually worth

Remember that Advertised Reference Prices (ARPs) must based on an actual price, supported by evidence of the price basis.

Is Naturally Derived ‘Natural’?

Gregorio v. Clorox
Class complaint – Clorox allegedly marketed its Green Works products as ‘naturally derived’ despite the fact they contained synthetic and non-natural ingredients. Plaintiffs claimed these synthetic and non-natural ingredients included: Boric Acid, Calcium Chloride, Citric Acid, Cocamine Oxide, Dimethicone/Silica Antifoam, Fragrance, Glycerin, Hydrogen Peroxide, Isopropanol, Lauryl Glucoside, Liquitint® Blue HP Dye, Liquitint® Bright Yellow Dye, Methylisothiazolinone, Octylisothiazolinone, Potassium Carbonate, Potassium Citrate, Sodium Gluconate (derived from GMOs), Sodium Hydroxide, Sodium Lauryl Sulfate, and Xanthan Gum.

Plaintiffs claimed they would not have purchased Green Works products had they understood the true nature of the products, or would have only been willing to pay significantly less for the products.
[N.D. CA; 3:17-cv-03824]
jbho: ‘natural’ is still a relatively unregulated term, so not sure how far this one will go. Stay tuned.

June 2017

Patriot Alleges He Was Duped By Misleading ‘Made in USA’ Claims

O’Sullivan v. iSpring
Class complaint – Water filtration system maker iSpring allegedly advertised its products as ‘Built in USA,’ despite the fact its parts and products were significantly sourced from overseas or imported completely. Plaintiff alleged despite iSpring representations, “all or virtually all” of its products were not made in the United States. Plaintiff further alleged these unqualified, express claims caused plaintiff to pay a premium for what he believed to be American made products, products he would not have bought had he known their true origin.

Claims were filed under the Georgia Fair Business Practices Act and the South Carolina Unfair Trade Practices Act, as well as unjust enrichment claims.
[N.D. GA; 1:17-cv-02237]
jbho: Note that FTC guidance specifically warns against using general terms like ‘produced,’ ‘created’ or ‘manufactured’ in the USA, since they are unlikely to be complete, and would likely require additional qualification. I guess we can add ‘built’ to that list.

“Made in USA” cases seem to be ramping up lately. According to the National Law Journal, 11 companies have come under scrutiny just this year. 

Also of interest, the complaint references a recent FTC settlement with iSpring for the same alleged misleading “Made in USA” claims. Highlights from the FTC Order include:

  • Prohibits iSpring from making “Made in USA” claims unless:
    • final assembly or processing of the product occurs in the United States
    • all significant processing that goes into the product occurs in the United States
    • all or virtually all ingredients or components of the product are made and sourced in the United States
  • Prohibits iSpring from making misleading claims about country of origin of its products
  • iSpring must deliver a copy of the Order to all employees, agents, and partners for the next 20 years
  • Maintain for the next 20 years:
    • accounting records
    • personnel records
    • all consumer complaints and refund requests
    • all records necessary to demonstrate full compliance with each provision of the Order
    • all ad copy or other marketing material making “Made in USA” claims
      • substantiation of such claims for 5 years after made

The order remains in effect for 20 years.

$30 Million Settlement In Deceptive Pricing Suit

Horosny v. Burlington Coat Factory
$30M settlement – Burlington allegedly used artificially inflated reference pricing to induce sales by misleading consumers as to an actual discount. Plaintiffs claimed the quoted ‘Compare to’ prices did not represent the price paid for substantial sales of comparable items at any other retailer, at any time or location. Plaintiffs further alleged Burlington failed to provide disclosures clarifying the basis for its Advertised Reference Prices (ARPs).

Highlights include:
• $29,824,500 non-reversionary settlement fund
• $7.50 merchandise certificate for each class member (~3.7M members), redeemable as $5 cash in-store or via mail
• $5,000 for each class representative (2)
• $1,137,000 for settlement administration
• $927,500 for class counsel (3% of settlement fund)
[C.D. CA; 2:15-cv-05005]
jbho: discount rates must be based on an actual price, supported by evidence of the price basis (how a company actually listed prices: MSRP, etc.), and you must disclose the basis for the pricing to consumers.

Interesting here is that recent cases I’ve seen seem to focus on store brand markups, and the fact that base pricing is deceptive since store brand merchandise is only sold at defendants’ locations. Here, the allegations seem to include any item sold, and that the MSRP/ARP quoted weren’t based on any available data.

$1.55 Million Settlement For Less Than Honest Natural Claims

In Re The Honest Company SLS Litigation
$1.55M preliminary settlement – The Honest Company allegedly marketed its Laundry Detergent, Dish Soap, and Multi-Surface Cleaner as being natural and free of harmful chemicals like Sodium Lauryl Sulfate (SLS). The Honest Company advertised on its products, its website, and on social media that its products were ‘Honestly Free of SLS‘ or ‘Honestly made without SLS,’ and instead contained Sodium Coco Sulfate (SCS), a coconut based cleanser that was a gentler alternative to harsh chemicals like SLS. However, plaintiffs claimed, the representation that SCS products were SLS free was misleading, as Sodium Coco Sulfate was 66% Sodium Lauryl Sulfate (according to studies cited in the complaint). The products allegedly contained SLS in concentrations of up to 14%.

Highlights include:
• $1,550,000 non-reversionary settlement fund
• at least $50 for each class member (eligible for more if have proof of purchase)
— class members may also opt for an Honest Company credit , valued at 1.5 times the recovery amount
• $1,000 for each class representative
• $387,500 for class counsel (25% of settlement fund)
[C.D. CA; 2:16-ml-02719]
jbho: another reason to be careful when using absolutes in advertising.

Additionally, a reason to make sure you know the products you’re advertising. I doubt the copywriters or marketing department would have known SCS contained SLS. But someone, somewhere in the chain dropped the ball. Maybe you should consider adding product ingredient claims to your QA checklists?

It appears The Honest Company has agreed to reformulate its products excluding SLS/SCS entirely.

Poultry Producer Runs Afoul Of Consumer Expectations

OCA v. Sanderson
Class complaint – Sanderson allegedly advertised its processed chicken products as ‘100% Natural,’ despite USDA testing that revealed the presence of antibiotics, tranquilizers, and other pharmaceuticals, some of which were not FDA approved for use in poultry. Plaintiffs also alleged testing detected the presence of pesticides that exceeded permitted thresholds or were not FDA approved for poultry. Plaintiffs further alleged despite the presence of these substances, Sanderson marketed it’s chicken products as:
• “100% Natural
• “only chicken in our chicken
• “no added hormones or steroids
• “raised without antibiotics
• “antibiotic free
Finally, plaintiffs alleged these claims were contradicted on Sanderson’s own website and social media feeds by statements such as “We don’t order antibiotics to be used unless the veterinarians deem them needed for flock health reasons.”

The complaint was filed by the Organic Consumers Association (OCA), Friends of the Earth, and Center For Food Safety.
[N.D. CA; 3:17-cv-03592]
jbho: the complaint is quite thorough in identifying the alleged ‘non-natural’ substances. Kinda scary reading. But remember, at this point they are only allegations. Allegations Sanderson vigorously denies.

The FDA hasn’t really provided much guidance on the term ‘natural,’ other than to say products should not contain artificial flavor, artificial colors, chemical preservatives, or any other artificial or synthetic ingredient, and products should only be ‘minimally processed.’ Final guidance on the use of term ‘natural’ was expected by the end of 2016, but AFAIK it hasn’t yet been released?

The USDA is updating its own ‘natural’ guidelines, but they have not yet been open to public comment.

Note also that recent FTC enforcement has focused less on ‘natural,’ but more on the ‘100%’ claim as misleading.

UPDATE: 11Aug2017 – The National Advertising Division issued a ruling calling Sanderson’s use of “raised without antibiotics” as a marketing gimmick or trick. Sanderson has agreed (under protest) to discontinue those claims. On the “antibiotic free” claim, NAD found this to be valid, since by federal law requires chicken be clear of antibiotics before they leave the farm, so no chicken in grocery stores contain antibiotics. The “antibiotic free” claim was acceptable since Sanderson believed 72 percent of consumers incorrectly believe that chicken sold in supermarkets contain antibiotics.”

Natural Cheese Suit Get Shredded

Morales v. Kraft
Defendant’s MSJ granted in part – Kraft allegedly marketed its ‘Natural Cheese’ as natural despite the fact it contained artificial color (neither healthy nor safe).

In decertifying the class, the court found the study produced by plaintiffs that determined consumers would pay $0.75 more for a ‘natural’ alternative cheese was insufficient to establish a basis for calculating restitution (based on perceived loss rather than actual money received by defendant in connection with the sale of the Product).

(The study) did not measure the market value of the Product either with the “natural cheese” label or without it. Rather, his analysis measured how much consumers value that label.”

Therefore, the class was decertified as to remedies.

The court ordered the parties to file briefs on recertifying the class, but for injunctive relief only. Triable issues of fact being:
(1) whether a reasonable consumer would interpret ‘natural cheese’ to mean no artificial coloring added
(2) whether that belief is material to a purchasing decision
(3) whether all artificial colors, regardless of source, are artificial ingredients
Plaintiff’s brief is due 16Jun2017, defendant’s response 23Jun2017.
[C.D. CA; 2:14-cv-04387]
jbho: interesting, the court declined to exclude the study that determined consumers would pay $0.75 more for a ‘natural’ alternative cheese. The court found many of Kraft’s challenges spoke to the weight, not the admissibility of the study. Thus, the reliability of the study was an “issue for the factfinder,” and denied Kraft’s motion to exclude. Although given the decertification, the point seems moot. However, the court felt the report still addressed materiality concerns relevant to the injunctive relief claims.

All told, the 20 pages of dicta dedicated to analysis of the study & methodology make for some interesting reading.

NJ Hospital Allegedly Misappropriated Likeness For Fitness Ads

Llopiz v. Hackensack UMC
Class complaint – Hackensack University Medical Center (UMC) allegedly used photos of plaintiff, photos taken for ‘internal use’ only, on Out-Of-Home (OOH) advertising materials, including in brochures and on a roadside billboard. Plaintiff claimed she only consented to ‘internal use,’ and the signature on a release allowing commercial use of her likeness was forged.
[Bergen Co. Sup. Ct.; L-3821-17]
jbho: a reminder of the importance of having well-structured agreements, clearly and conspicuously communicated, and well preserved in the event consent needs to be verified.

And if you’re going to use likenesses in advertising, you might want to plan ways to retrieve or pull down that advertising in the event the subject changes his/her mind.

May 2017

Retailer Accused Of Misleading Base Prices

Chase v. Hobby Lobby
Class complaint – Hobby Lobby allegedly used fictitious ‘marked’ prices on Hobby Lobby merchandise that induced sales by misleading consumers as to an actual discount. Plaintiff further alleged that Hobby Lobby never sold products – available only at Hobby Lobby – at the claimed ‘marked’ prices. Plaintiff claimed she never would have bought items has she known the actual prices, and the true value she was receiving from her purchases.
[S.D. CA; 3:17-cv-00881]
jbho: note that Hobby Lobby recently settled similar allegations with the AG in Virginia, and agreed to cease comparison pricing in violation of VA state law, as well as pay $8,000 to cover the costs of the AG’s investigation.

Supplement Maker Accused Misleading BOGO Prices

Larson v. Puritan’s Pride
Class complaint – Puritan allegedly artificially inflated the prices of its products in Buy One Get One (BOGO) free promotions, inducing consumers to unknowingly purchase products at a premium price. Plaintiff further alleged that Puritan ran promotions indicating the BOGO offers were limited in time, however, they had been running continuously for the past four years. Plaintiffs claimed they would not have bought items had they known the cost of the ‘free’ product was built into the base price.
[N.D CA; 3:17-cv-02536]
jbho: a new twist on misleading base pricing litigation? Remember discount rates must be based on an actual price, supported by evidence of the price basis (how a company actually determines the listed prices), and the basis for the pricing to consumers must be readily available.

March 2017

Social Media And Risks Of User Generated Content (UGC) In Advertising

Kraft v. Anheuser-Busch
Complaint – Anheuser-Busch allegedly used a photograph of plaintiff, without permission, to promote its ‘Natural Light’ product. Plaintiff alleges a Facebook picture was used without her permission as part of an “Every Natty has a Story” Natural Light advertising campaign.

Timeline of events:
• Feb 2013 – photo of plaintiff taken, posted to plaintiff’s Facebook account
• March to June 2014 – “Natty Rewards” promotion
• 2014 to 201? – Every Natty has a Story campaign
• May, June 2016 – ownership of photo assigned to plaintiff, copyright registered
• Feb 2017 – complaint filed

Anheuser-Busch has stated it had permission to use the image, as it was submitted through its “Natty Rewards” Facebook promotion.
[E.D. N.C.; 4:17-cv-00022]
jbho: a reminder to make sure you are getting appropriate consent for third-party content in your ads.

If you are going to use a likenesses or User Generated Content (UGC) in advertising campaigns, you might want to get a signed consent release, rather than rely on click-wrap terms. And make sure the submitter actually has the authority to grant the necessary rights.

The Natty terms did grant Anheuser-Busch an “exclusive, worldwide, perpetual, irrevocable, unrestricted, royaltyfree, sub-licensable right and license to exploit your Entry…” ( Perhaps the validity of that agreement will be analyzed.

Alternatively, Anheuser-Busch could well be a victim of “sabotage liability,” and some unknown third party surreptitiously entered plaintiff. Guess we’ll have to wait and see.

Suit Over Alleged Use-Or-Lose Audiobook Credits

McKee v. Amazon (Audible)
Class complaint – Amazon allegedly failed to adequately inform Audible subscription holders there was a ceiling on credits, and any unused credits would be forfeited when cancelling a subscription. Plaintiff claimed this was inconsistent with claims made in advertisements that stated:
• one credit equals one audiobook
• stored credits are ‘rolled over’ to your next billing cycle
• ‘no strings attached’ if a consumer wants to cancel

Plaintiff claimed the restrictions and loss of credits were not adequately disclosed at the ‘point of sale’ (the tickbox to check at purchase), and were only presented in “inconspicuous fine print,” stating:
• “once you have reached the roll over limit for your membership plan, your oldest credit(s) will expire in order for you to receive new credits
• “membership credits do not expire’ as long as you have a membership
Thus, argued plaintiff, one credit did not equal one audiobook, as credits could expire or be revoked. Plaintiff further claimed the restrictions violated gift cards laws – the Audible credits being ‘gift cards’ since they were only redeemable at Audible.

Plaintiff also alleged the automatic payment renewal information did not meet statutory requirements*, and failed to inform consumers they would be charged every month in perpetuity, without notice, against any card associated with any Amazon account.

*Must be in text larger than surrounding text, in contrasting type, font, or color, or otherwise set off from the surrounding text.
[C.D. CA: 2:17-cv-01941]
jbho: a reminder that and restrictions or limitation must be clearly and conspicuously disclosed. And disclaimers cannot contradict the claim. Also for recurring charges, make sure to get express informed consent, which is, of course, dependent on the quality of the aforementioned disclosures.

February 2017

Entire Chain Of Events Must Be Considered In False Ad Suit

Veera v. Banana Republic
Reversed – Banana Republic allegedly posted 40% discount signs in store windows that did not disclose sale limitations. Plaintiffs claimed the limitations were only made know when ringing items at the register, after investing time in selecting items and waiting in a checkout line. Plaintiffs purchased some of the items selected, stating, “to leave with nothing would be a complete and utter waste of energy and time.” They did not ask to speak to a manager or call Banana Republic to complain. Plaintiffs claimed embarrassment, frustration, and desires to “not make a scene” caused them to make purchases and promptly leave.

The county court granted defendant’s motion for summary judgement finding that lost shopping time was not money or property required to confer standing (particularly since some plaintiffs made purchases anyway).

The appellate court found plaintiffs adequately pled economic harm by alleging Banana Republic sold items to plaintiffs in violation of California law* (“plaintiffs had a legally protected interest in knowing from the outset, when they started to shop, the true prices of the items they chose to buy“). If reliance on the alleged misleading advertising was a substantial
factor in plaintiffs’ decisions to buy, there would be a causal link to any economic harms. That plaintiffs made a purchase (i.e., the scheme was successful), did not deprive plaintiffs of standing.

Additionally, there were factual disputes as to the contents of the signage viewed by plaintiffs. Some were qualified or disclaimed: “Save 40% on select styles*” or “Save 40% on your purchase.*”, but Exhibits presented signage with no asterisks (disclaimers).

The appellate court therefore reversed, ruling there were triable issues of fact and evidence presented by defendant was insufficient to warrant summary judgment.
[CA Appelate Ct. 2nd Dist.; B270796 (Orig: LA Co Super. Ct.; BC541146)]
jbho: a reminder of the importance of clear and conspicuous disclosures. Following the 4Ps (presentation, proximity, prominence, and placement) is always a good idea. If plaintiffs can show they were lured into a purchase, there is always the potential for UDAP-type violations.

Although, this one is likely far from over. In a dissenting opinion, one justice criticized the “momentum to buy” theory, and felt since plaintiffs changed their purchase decisions, they cannot say they relied on any misrepresentations – thus the defendant’s MSJ should have been affirmed.

*For the record, claims were brought under California’s Unfair Competition Law (UCL – Bus. & Prof. Code §§ 17200 et seq.), False Advertising Law (FAL – Bus. & Prof. Code §§ 17500 et seq.), and Consumers Legal Remedies Act (CLRA – Civ. Code §§ 1750 et

One Million Dollars Per Hour For Alleged Energy Drink Misrepresentations

State of Washington v. Living Essentials (5-Hour-Energy)
$4.3M final judgement – Living Essentials (LE) ran ads and used product packaging that allegedly made misleading claims about the effectiveness of its Decaf 5-Hour Energy drink. The AGs office alleged that Decaf 5-Hour Energy was deceptively advertised as:
• superior to coffee
• recommended by doctors
• generated energy and alertness that ‘lasts for hours’
• ‘provides a sustained energy boost’

As a result LE was:

  • Enjoined from making performance claims that are not supported by competent and reliable scientific evidence, alone or in combination with other products/ingredients
  • Enjoined from misrepresenting survey results in advertising survey data used in advertising claims must be created, conducted, and evaluated by qualified professionals, using survey industry accepted/approved methods
  • Ordered to pay the AGs office $2,095,992.63 in fees and costs
  • Ordered to pay $2,183,747 in civil penalties for allegedly deceptive ads/packaging
    • Ask Your Doctor” ad (aired 19,716 times * $100 = $1,971,600)
    • “Choose Wisely” ad (aired 1,040 times * $100 = $104,000)
    • “Construction Site Cowboy” ad (aired 975 times * $100 = $97,500)
    • misleading product labels (2,482 units sold * $4.29 = $10,647)

The AGs office argued the penalties were reasonable as there were a large number of sales over a short period of time, once consumed there was no way to return the product or reverse any health impacts, and defendant “spent more time trying to justify the science behind their ads after-the-fact (i.e., at trial) than they did before marketing the products”.
[King Co (WA) Super. Ct.; 14-2-19684-9]
jbho: I think the main lesson here is if you are going to cite product tests, or scientific testing in your ads, make sure those test are verified by an independent 3rd party.

Living Essentials has indicted they will appeal. Interestingly, LE prevailed in a similar suit in Oregon, where the court found the claims were puffery as they were subjective statement about “a ‘feeling’ of energy or alertness” (Multinomah Co (OR) Circ. Ct; 14CV09149), and even if misleading would not materially influence consumer purchasing decisions. Additionally, the studies cited were subject to varying interpretations, so to the extent statements may have been misleading, the court felt they were not willful.

November 2016

Real Suit Over Fake Sale Prices Moves Forward

Shimono v. Harbor Freight Tools
Motion to dismiss denied – Harbor Freight allegedly inflated base prices of tools/equipment, failed to disclose warranty terms (of its inferior products), and printed misleading coupons (obscured that 20% was off one item rather than entire purchase & discount applied to lowest-priced item not the ‘any item’ advertised). Plaintiff alleged he would not have made purchases or not paid as much, absent Harbor Freight’s misrepresentations.

The court found plaintiff’s alleged losses (economic injury) were both ‘concrete and particularized’ injuries. Since plaintiff’s allegations were based upon a reasonable investigation (strike-through prices did not represent prevailing retail prices), plaintiff stated a plausible claim (pattern of deception, even if plaintiff may not have purchased all products in his research).
[C.D. CA; 5:16-cv-01052]
jbho: a reminder to make sure ad copy is accurate, and any needed disclosures are displayed clearly and conspicuously

October 2016

Qualified Statements Not Misleading

XYZ Two Way Radio v. Uber
Dismissed – Uber allegedly misrepresented its background checks in its advertising. The court found that the challenged statements were aspirational, and qualified with terms like ‘committed to,’ ‘aim to,’ ‘believe deeply.’
[E.D. N.Y.; 1:15-cv-03015]
jbho: a reminder to avoid absolutes in advertising copy.

Also interesting it appears that Uber had pulled statements like ‘industry leading’ and ‘leads the industry’ from its copy in late 2014. Uber now uses phrases like ‘constantly improving’ instead.

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