Wednesday, December 12, 2018

Cheezit, the food cops! 2d Circuit reinstates claim over "made with whole grain" where most grain content is white

Mantikas v. Kellogg Co., No. 17-2011 (2d Cir. Dec. 11, 2018)

Plaintiffs bought Cheez-It crackers that were labeled “whole grain” or “made with whole grain.” They alleged violation of New York and California consumer protection laws because such labeling would cause a reasonable consumer to believe that the grain in whole grain Cheez-Its was predominantly whole grain, when, in fact, it was primarily enriched white flour. The district court held that the whole grain labels would not mislead a reasonable consumer, and the court of appeals (in some tension with its recentholding on Trader Joe’s truffle-flavored oil) reversed.

The challenged packages used “WHOLE GRAIN” in large print in the center of the front panel of the box, and “MADE WITH 5G OF WHOLE GRAIN PER SERVING” in small print on the bottom or “MADE WITH WHOLE GRAIN” in large print in the center of the box, with “MADE WITH 8G OF WHOLE GRAIN PER SERVING” in small print on the bottom. Both packages also contained a “Nutrition Facts” panel on the side of the box, which stated in much smaller print that a serving size of the snack was 29 grams and that the first ingredient on the ingredients list (in order of predominance, as required by federal law) was “enriched white flour.” “Whole wheat flour” was either the second or third ingredient.

The district court held that both the “MADE WITH WHOLE GRAIN” and “WHOLE GRAIN” labels would not mislead a reasonable consumer, because both statements were true and were “qualified by further accurate language detailing the number of grams of whole grain per serving.”

False advertising or deceptive business practices under New York or California law requires that the deceptive conduct was “likely to mislead a reasonable consumer acting reasonably under the circumstances.” Context is crucial, including disclaimers and qualifying language. The district court reasoned that “a reasonable consumer would not be misled by a product’s packaging that states the exact amount of the ingredient in question.” But the packaging here allegedly implied that the product was “predominantly, if not entirely, whole grain,” and it wasn’t. This was plausibly misleading because they falsely imply that the grain content was entirely or at least predominantly whole grain.

The ingredient list didn’t help, even though it indicated that a serving size of Cheez-Its was 29 grams and the list of ingredients names “enriched white flour” as the first (and thus predominant) ingredient. The serving size didn’t “adequately dispel the inference communicated by the front of the package that the grain in ‘whole grain’ crackers is predominantly whole grain because it does not tell what part of the 29-gram total weight is grain of any kind.” Plus, adopting the Ninth Circuit’s Williams rule, the court of appeals agreed that “reasonable consumers should [not] be expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box.” The Nutrition Facts panel and ingredients list plausibly contradicted, rather than confirmed, the “whole grain” representations on the front of the box.

Other cases dismissed on the pleadings involved plaintiffs who alleged deception because a product label misled consumers to believe, falsely, that the product contained a significant quantity of a particular ingredient. Here, however, the deceptiveness was the implication that, of the grain content in the product, most or all of it is whole grain, as opposed to less nutritious white flour. In addition, in most of the other cases, “plaintiffs alleged they were misled about the quantity of an ingredient that obviously was not the products’ primary ingredient.” No reasonable consumer would think that crackers “made with real vegetables” were made primarily with fresh vegetables.  Here, “reasonable consumers are likely to understand that crackers are typically made predominantly of grain. They look to the bold assertions on the packaging to discern what type of grain.” Thus, the front of the package could have misled them. The court declined to adopt a rule that would allow any “made with X” advertising when the ingredient X was in fact present, no matter how deceptive (e.g., if the crackers here were 99.999% white flour).

Tuesday, December 11, 2018

low volume of confused callers doesn't establish irreparable harm

TrueNorth Companies, L.C. v. Trunorth Warranty Plans, LLC, No. C17-31-LTS, --- F.Supp.3d ----, 2018 WL 6438370 (N.D. Iowa Dec. 7, 2018)

TrueNorth sued TN Warranty for trademark infringement and related claims based on the parties’ respective design logos:
plaintiff's logo
defendant's logo
TrueNorth provides financial and insurance services, including products and services to commercial transportation companies and drivers including “transportation risk management, transportation property insurance and transportation equipment insurance. TrueNorth originated in eastern Iowa and now has offices in Tennessee, Texas, Illinois, Michigan and Colorado.”  TN Warranty sells commercial truck warranties, specifically “extended warranty services for mechanical components for used commercial vehicles manufactured by others whose original manufacturer’s warranty has expired.” It markets through independent truck dealers or “authorized retailers,” and the end user is a truck owner or fleet owner who owns the truck(s) covered by the warranties. About 80 percent of its authorized retailers are used truck dealers who sell TN Warranty products at the point of sale at or near the same time they close a deal for the sale of a used truck, while about 15 percent of its warranties are sold by finance companies that provide the financing for the truck and approximately 5 percent of its warranties are sold by repair facilities. Sales to end consumers (individual truckers) are under 1 percent of sales.  TN Warranty argued that “in training new authorized retailers, it emphasizes that it is not selling insurance, but a limited warranty. It does not compete with providers of insurance products and does not market its warranty products through insurance brokers or agents.”  According to TN Warranty, neither it nor its retailers have encountered TrueNorth in the marketplace and was unaware of any other entities that market insurance to the end user in the same way that TN Warranty markets its products; its clients don’t offer insurance. Also, TN Warranty said, “most customers are interested in coverage, cost and convenience rather than the provider of the warranty.”

TrueNorth registered three marks in 2006, including the one shown above, a word mark for TRUENORTH, and the following logo:

TN Warranty started as CompassOne Warranty in 2015, with a mark derived from an earlier company with a mark called Vector Compass. 

In 2015, another entity sued alleging that “Compass” infringed its rights, so (apparently after a contempt order) the founder formed TN Warranty instead, using “TrüNorth” to pay homage to its CompassOne Warranty and Compass Group roots. “It chose to use a dieresis (ü) in its mark to give the brand an international feel, consistent with the company’s international aspirations.”  TN Warranty applied to register the mark; TrueNorth opposed and TN Warranty defaulted.  (Seems like a B&B v. Hargis issue here.)

In early 2016, TrueNorth sent a C&D; in mid-2016, it received an application for insurance from one of its clients in the trucking industry, and among the forms submitted with the application was a Component Breakdown Limited Warranty Agreement form for TRÜNORTH™.  TrueNorth ultimately sued at the end of March 2017. TN Warranty states that it then voluntarily redesigned its mark as follows:

TN Warranty also argued that a non-party, Premium 2000+, was run by an ex-business partner turned rival of TN Warranty’s founder, who’s filed various lawsuits against that founder.  Premium 2000+ allegedly offered to do business with TrueNorth, but cited TN Warranty’s name and mark as a “road block” to doing business, indicating TrueNorth’s lawsuit was premised more on Premium 2000+’s animosity towards the founder rather than on true confusion in the marketplace. TrueNorth disagreed, citing emails and phone calls from truck drivers and professionals within the trucking and insurance industries that allegedly demonstrated confusion.

Preliminary injunction: though the Eighth Circuit has not yet ruled on the Lanham Act consequences of eBay and Winter, those cases lead to the conclusion that a presumption of irreparable harm upon showing likely success on the merits (via confusion) is not warranted.

Harm to reputation can, however, be irreparable.  TrueNorth argued that TN Warranty has received negative consumer reports from the Better Business Bureau and Trucker’s Report (an online forum used by truck drivers). Some of TrueNorth’s trucking industry partners contacted TrueNorth on behalf of drivers with warranty claims in an attempt to resolve warranty issues. It explained its delay in seeking a preliminary injunction stems with an increase in calls about warranties that it received in 2018. TrueNorth argued that it started recording calls in January 2018 due to the “increasing number of calls and other instances of confusion among TrueNorth customers.” It recorded six calls in February 2018, four calls in March 2018, one call in April 2018, three calls in May 2018, no calls in June 2018, two calls in late July 2018 and six calls in August 2018. Its witness described the harm as follows: “Just verbal communications that have been relayed to me that they think that the presence of having su[ch] a similar logo is creating challenges and confusion that is disruptive to our working together to market to owner operators and truck lessees.” The witness further described the situation as creating challenges with how TrueNorth tries to market to leasing companies, but could not provide any specific examples and was not aware of any specific loss of business with the company under discussion.

The court found this evidence of irreparable harm insufficient. Under Eighth Circuit law, a party must show that “the harm is certain and great and of such imminence that there is a clear and present need for equitable relief.” Though TrueNorth showed some level of confusion through phone call recordings and email communications, that didn’t rise to the level of irreparable harm (such as loss of customers or decline in sales) based on this confusion. The time addressing confusion and explaining that TrueNorth provides insurance services and not warranty services “can be addressed through monetary means.”  As to call volume, TrueNorth didn’t provide context; apparently each of the 28 to 30 individuals who take calls in TrueNorth’s call center receive 25 to 30 calls per day (and up to 100 calls per day during peak season). “Six calls per month is hardly so disruptive that TrueNorth is suffering irreparable harm that cannot be addressed through monetary means.”

Nor did TrueNorth show that the alleged harm was more than a possibility. Though reputational damage can constitute a threat of irreparable harm and is difficult to measure, there was still no showing that it was likely. TrueNorth argued that its reputational damage came from (1) customers upset about their warranties and (2) industry partners who have commented on TN Warranty’s presence. But TrueNorth doesn’t sell truck warranties, and there was no record evidence that upset TN Warranty customers would tell fellow truck drivers to avoid business with “True North” or fail to go to TrueNorth for insurance based on a negative impression stemming from their warranty.  This was possible, but merely speculative. And the only industry partners at issue were Lone Mountain Leasing (which raised the alarm on the logo in the first place) and Premium 2000+ (“which competes with TN Warranty and has its own arguable agenda for pursuing business with TrueNorth”).  And the relevant witness couldn’t establish any specific harm as to those partners.  As to Premium 2000+, it sought out TrueNorth to do business, not the opposite, and its reason for not going forward was “questionable based on the record,” which included an email stating that they couldn’t do anything unless TrueNorth got rid of TN Warranty’s founder. “TrueNorth has demonstrated only that its affiliates have acknowledged the presence of another entity named “True North.”

TrueNorth had dealt with other True North entities, and had previously entered into coexistence agreements with one that provided financial consulting services to large banks and credit reporting agencies and another that provided advertising and public relations services. “TrueNorth’s willingness to co-exist with other entities using the same name, albeit in arguably different industries, tends to lessen the alleged harm.”

Finally, its delay in seeking relief weighed against finding irreparable harm. TrueNorth waited 17 months after filing its complaint to bring its motion for preliminary injunction, and even longer if you measure from the time TrueNorth learned of TN Warranty. “TrueNorth’s only explanation for the delay was that it was collecting sufficient evidence to support its motion. If the harm was truly as serious, imminent and irreparable as alleged, TrueNorth should not have needed 17 months to bring a properly supported motion.”

Pleading compliance w/test rules doesn't plausibly plead compliance for consumer plaintiffs

Anglin v. Edgewell Personal Care Co., 2018 WL 6434424, No. 4:18-CV-00639-NCC (E.D. Mo. Dec. 7, 2018)

Are there people who believe that Twiqbal improved consistency?  Because I do not understand the level of detail required. Here, the magistrate holds that pleading that one’s testing complied with FDA regulations is not sufficient to plausibly plead that one’s testing complied with FDA regulations.  I would have thought that, if it’s enough of a fact to be determined by a court and not trigger preemption, then it’s enough of a fact to be pled on its own, even if it is a potentially dispositive issue.  But I don’t see non-advertising Twiqbal cases, so I might be overly critical.

The plaintiffs sought to represent a class of Banana Boat “SPF 50” or “SPF 50+” product purchasers. They alleged that “rigorous scientific testing has revealed that the Products do not provide an SPF of 50, much less ‘50+’.” Consumer Reports magazine reported in May 2016 that “its own testing had revealed that Banana Boat Kids SPF 50 sunscreen lotion had an SPF of only 8.” Further, plaintiffs alleged that their own independent testing using FDA methods demonstrated the Products had SPFs lower than listed on the label. They brought various state law false avertising claims.

The court rejected defendants’ primary jurisdiction argument. The FDA published a “sunscreen Final Rule” allegedly “mandating a whole host of highly specialized, highly scientific, and precise technical and scientific protocols that manufacturers must follow relating to testing and labeling.”  Agency expertise is “the most common reason for applying the doctrine,” which is also used “to promote uniformity and consistency with the particular field of regulation.” Other cases have rejected applying the doctrine to sunscreen labeling, given that plaintiffs allegedly relied on long-established SPF testing procedures and standards, rendering their labels false and misleading, which is a routine factual question for courts. Defendants argued that the court would have to determine whether the parties’ tests followed the technical and scientific requirements of the sunscreen Final Rule. But “this Court is equipped to address such technical and scientific questions, as this and other courts routinely do on a regular basis.” Even if the FDA was in the “best” position to interpret the Final Rule, the court could do so too.  In terms of uniformity and consistency, it was merely speculative that the FDA would be taking further action, much less formal action, or that any such action would be retroactive. Though the FDA had solicited bids for testing sunscreens over two years ago, there was no indication that further action was forthcoming.

However, the preemption argument did better in that it helped kick out the case, although not definitively. The court found that the FDA testing requirements meant that no non-FDA compliant testing could be used to establish the true SPF of a sunscreen, making the Consumer Reports testing irrelevant. If and only if plaintiffs’ testing was FDA-compliant, then their claims were not preempted.  The relevant allegations:

…. Plaintiffs conducted their own independent testing of the Products, utilizing the methodology for SPF testing mandated by the FDA.
Specifically, the independent testing conducted by Plaintiffs was conducted in compliance with all FDA testing methods embodied in FDA Final Rule, 21 CFR Parts 201 and 310, (Federal Register/Vol 76, No 117/Friday, June 17, 2011/Rules and Regulations, including 21 CFR 201.327).
The results of the independent testing conducted by Plaintiffs were consistent with the results suggested by Consumer Reports’ test results and confirmed that the Products had actual SPFs substantially lower than the claimed SPF 50 or “50+”.
Plaintiffs’ investigation concluded that all three products, clearly labeled as containing SPF 50 or “50+”, contained an SPF of less than 37.8 and no more than a 30.1.

This wasn’t sufficient (though plaintiffs said they were prepared to file an amended pleading). The complaint was 34 pages long and only 4 paragraphs were devoted to this crucial issue (this comparison strikes me as a bad measurement tool). Only one paragraph mentioned the specific methodology. There was a need for more than a “conclusory statement that the testing complied with the FDA Final Rule, an ultimate question this Court may be called upon to decide in the future.” And it was unclear whether plaintiffs had FDA-compliant test results relating to all three challenged products. Thus, the court found it prudent to allow an amended complaint.

The court also commented that plaintiffs would likely have difficulty satisfying the predominance requirements on their nationwide claims, but declined to dismiss the class certification parts of the case at this time.

Thursday, December 06, 2018

Juxtaposition of claims about protein amounts and sources plausibly creates falsity

Hi-Tech Pharmaceuticals, Inc. v. HBS Int’l Corp., --- F.3d ----, 2018 WL 6314282 , No. 17-13884 (11th Cir. Dec. 4, 2018)

Hi-Tech sued HBS, alleging that the label of its protein-powder supplement HexaPro misled customers about the quantity and quality of protein in each serving, in violation of the Georgia Uniform Deceptive Trade Practices Act and the Lanham Act.  The district court dismissed the Georgia claims on FDCA preemption grounds and found that it wasn’t plausible that the label was misleading. The court of appeals affirmed the first conclusion, but reversed the second, and declined to find that the FDCA precluded Lanham Act claims here.

The front of the label identifies the product as an “Ultra-Premium 6-Protein Blend” with “25 G[rams] Protein Per Serving,” and it touts the product’s “6 Ultra-High Quality Proteins” and “5 Amino Acid Blend with BCAAs [Branch-Chain Amino Acids].” The left side repeated “an Ultra-Premium, Ultra-Satisfying Blend of 6 High-Quality Proteins” and identified those six whole-protein sources, stating that the product “is also fortified with 5 Amino Acids to enhance recovery.” The right side features the nutrition-facts table, which states that HexaPro contains 25 grams of protein per serving, and the list of ingredients. This side also has a table labeled “Amino Acid Profile” whose heading indicates that HexaPro contains 44 grams of amino acids per serving, while the table itemizes only 25 grams.

Hi-Tech alleged three kinds of deception.  First, HexaPro contains free-form amino acids and other non-protein ingredients as well as whole proteins; an analysis that excludes these “spiking agents” and counts only “total bonded amino acids”—which alone are molecularly complete proteins—allegedly yields an “actual protein content” of “17.914 grams per serving,” not 25 grams per serving. However, the applicable FDA regulation permits “[p]rotein content [to] be calculated on the basis of the factor 6.25 times the nitrogen content of the food,” even if not all of a product’s nitrogen content derives from whole-protein sources.

Second, Hi-Tech argued that the label and in particular the use of “Ultra-Premium 6-Protein Blend” suggests that the product’s entire stated protein content derives from the whole-protein sources identified on the left side of the panel. Third, Hi-Tech alleged that the front of the label was misleading about both the quantity and the source of the product’s protein content: the proximity of “Ultra-Premium 6-Protein Blend” to the phrase “25 G Protein Per Serving” misled consumers into believing that HexaPro “contains 25 grams of the ‘Ultra-Premium 6-Protein Blend’-type protein per serving,” but it has only roughly 18 grams from those sources.  The district court rejected these claims because HexaPro’s label “provides a detailed breakdown of all ... ingredients, including the mix of amino acids.”

Georgia law: The FDCA expressly preempts state laws that “directly or indirectly establish ... any requirement for nutrition labeling of food that is not identical to the requirement of section 343(q) of this title, except [for sales of food at some restaurants], or ... any requirement respecting any claim of the type described in section 343(r)(1) of this title made in the label or labeling of food that is not identical to the requirement of section 343(r) of this title.” In turn, section 343(q) regulates “nutrition information” that must be disclosed about certain nutrients in food products, including the “total protein contained in each serving size or other unit of measure.”  Section 343(r) governs all other statements about nutrient content that “expressly or by implication” “characterize[ ] the level of any nutrient.”  

Hi-Tech’s state-law claim was therefore preempted. Federal regulation expressly allows “[p]rotein content [to] be calculated on the basis of the factor 6.25 times the nitrogen content of the food,” and Hi-Tech didn’t dispute that HexaPro’s labeling complied with this regulation. Alleged misleadingness about the nature, source, and quality of the whole proteins, free-form amino acids, and other ingredients that make up HexaPro’s advertised 25 grams of protein per serving would have to be fixed by changing the advertised amount of protein or itemizing each source’s contribution, but the FDCA and its regs don’t require that. “[T]o avoid preemption, Hi-Tech’s state-law claim must be identical, not merely consistent, with federal requirements. To the extent that the Georgia Uniform Deceptive Trade Practices Act would require changes to HexaPro’s labeling, it would ‘directly or indirectly establish’ requirements that are ‘not identical to’ federal requirements.”

Lanham Act: Initially, the court of appeals rejected the argument that Hi-Tech’s allegation about the true whole-protein content was “conclusory” because it didn’t explain HexaPro’s chemical composition; Twiqbal doesn’t require a plaintiff to provide evidence for its factual allegations.  Courts can disregard legal conclusions and “threadbare” recitals of the elements, but an allegation about how much protein is actually in a product isn’t a legal conclusion.  That’s “a specific assertion about physical and chemical fact that is either true or false, no matter what legal conclusions it may or may not support.”

Given that, the complaint plausibly alleged that the label was misleading. “Considering the label as a whole and taking its statements in context, we find it plausible that a reasonable consumer would be misled to believe that a serving of HexaPro contains 25 grams of protein derived from the ‘6-Protein Blend’ comprising the ‘6 High-Quality Proteins’ listed on the label.” Even an additional prominent statement that the product contained an amino acid blend wasn’t enough to avoid this conclusion. The allegation was not that consumers would be misled to believe that the only ingredient is the “Ultra-Premium 6-Protein Blend.” Rather, Hi-Tech argued that the label would induce a reasonable consumer to believe that the protein in HexaPro derives exclusively from the six-protein blend, and this was at least plausible. The label doesn’t indicate that the claimed 25 grams came from any other source than the whole-protein ingredients; other than in the 25-gram claim, it never used the word “protein” to refer to anything other than the whole-protein ingredients, and instead consistently treated “amino acids” as separate from and providing distinct nutritional benefits from “protein.” The “Amino Acid Profile” on the right side of the label listed 25 grams of amino acids, but provided no explanation of how this figure related either to the product’s 25 grams of protein per serving or the 44 grams of amino acids per serving advertised at the top of the table.

“Based on the total impression given by the label, it is plausible that only sophisticated consumers schooled in federal regulations or nutrition science would understand or even suspect that free-form amino acids or other non-protein ingredients form any part of HexaPro’s stated 25 grams of protein per serving.” While the FDA permits protein calculations based on free-form amino acids and other nitrogen-containing non-protein ingredients, Pom Wonderful established that the FDCA “does not generally bar claims of false advertising of food under the Lanham Act.”

HBS’s specific arguments for preclusion also failed. HBS argued that application of the Lanham Act would create “a genuinely irreconcilable conflict” with the federal regulation governing protein calculations because it couldn’t simultaneosuly disclose both 25 grams of protein to satisfy the requirements of the FDA and 18 grams to satisfy Hi-Tech. But that wasn’t the only way to cure the misrepresentation. “[I]t would suffice to clarify on the HexaPro label how much protein in each serving derives from the six-protein blend and how much derives from free-form amino acids and other non-protein ingredients”; there was no federal law against that.

HBS also argued that the Lanham Act claim would be barred barred “if determining the truth or falsity of the [challenged] statement would require a court to interpret FDA regulations, which is generally left to the FDA itself.” And HBS alleged that Hi-Tech was asking the court “to substitute its own judgment regarding the most appropriate way to measure protein for the FDA’s judgment.” But the conclusion didn’t follow from the premise. The no-interpretation rule involves claims trying to “circumvent the FDA’s exclusive enforcement authority by seeking to prove that [d]efendants violated the FDCA, when the FDA did not reach that conclusion.” Hi-Tech’s claim doesn’t require the court to question the FDA’s conclusion that protein content may be calculated on the basis of the factor 6.25 times the nitrogen content of the food. Instead, the question was whether the HexaPro label was misleading “in the context of the label’s failure to specify the sources of the nitrogen measured by the federal test.”