My latest copyright acquisition

From Franklin Mint Corp. v. Nat’l Wildlife Art Exch., 575 F.2d 62 (3d Cir. 1978), the works in suit, Cardinals on Apple Blossom and The Cardinal:

Claims that "non-drowsy" is false aren't preempted by FDCA

Calchi v. Topco Assoc., LLC, 2024 WL 4346420, No. 22-cv-747 (N.D. Ill. Sept. 30, 2024)

Is there any circuit style more distinctive than the Seventh Circuit style? (Cf.)

This is one of a number of lawsuits against purportedly non-drowsy cold meds that are allegedly in fact drowsiness-promoting because of an active ingredient called Dextromethorphan Hydrobromide, which studies allegedly confirm causes drowsiness. The court was snarky about the multiple lawsuits and their resemblances. Calchi herself sued a different manufacturer in the SDNY. “She might have a big fool-me-once, fool-me-twice problem (and an adequacy of class representation problem, too).”

TopCo argued FDA preemption. The FDA expressly considered the claim that “DXM caused drowsiness and determined that insufficient data existed to support such a finding.” So it doesn’t require a drowsiness warning. Thus, TopCo argued, Calchi’s claim would create separate requirements that are “not identical” to the federal requirements and are thus preempted.

Calchi responded that, regardless, TopCo cannot add false or misleading information to the label. Controlling Seventh Circuit precedent agreed with her (possibly to the court’s dismay). True, a state law that prohibits using the label “non-drowsy” for DXM seems “different from” the federal regulation, which doesn’t ban calling DXM “non-drowsy.” But Bell v. Publix Super Markets, Inc., 982 F.3d 468 (7th Cir. 2020), reasoned that, when the FDA standard of identity required only that the label call the item “Grated Parmesan Cheese,” and was silent about whether the products could be labeled as “100%” cheese, a deception claim wasn’t precluded. States may not “tack on further required disclosures” but they may prohibit advertisers “from voluntarily adding deceptive language to the federally permitted labels.” This was so because doing so doesn’t create any new requirement, given that the FDCA already provides that false or misleading labels constitute misbranding. This FDCA provision seems to distinguish consumer protection claims from attempts to add requirements orthogonal to the federal scheme. The court imagined a hypothetical where the federal government said things to park visitors like “don’t feed the bears” and “stay on the paths” and the state then wanted to add a “don’t swim in the rivers” rule. But here, the federal rule is similar to “don’t engage in dangerous behavior,” and the plaintiff is trying to establish that something is “dangerous.” If she’s right, then there’s no “difference” between the law and its application, just a level of specificity. The preemption question is whether states—whether through statutory torts or otherwise—can specify whether something is false or misleading if the FDA hasn’t opined on the issue.

Indeed, the court concluded, states can’t add to the list of required disclosures, but “if the federal government has not addressed a statement about D, then states can ban a statement about D if the states believe that D is false.” If the state law is directed to banning false and misleading statements, it “doesn’t add anything new, because federal law already prohibits false and misleading statements.” Thus, unless a monograph “protects a particular statement,” the preemption provision of the FDCA “does not expressly preempt state-law prohibitions on deceptive statements that sellers add voluntarily to their labels or advertising.”

Following the course of my thoughts exactly, the court suggested that “this issue boils down to an all-too-common, all-too-important question: who decides? … If the FDA looked at a statement, and took no position on whether it is false or misleading, can the states ban it?” But Bell made the question academic. (Thanks! I agree, it’s a super important question! Not much reasoning in the cases! FWIW, I incline towards the Bell position, because the FDA has way too much on its plate to go after whatever new language marketers think of next. But the ability of state legislatures to declare something to be false or misleading as a matter of law worries me. Does the First Amendment require advertisers to have an opportunity to disprove falsity/misleadingness of their commercial speech (outside the IP context?).)

Calchi alleged that TopCo shouldn’t have voluntarily placed a misleading “Non-Drowsy” label on its medicine. That’s not preempted.

A reasonable consumer could plausibly be materially deceived by “non-drowsy,” since there were plenty of obvious reasons to want to avoid drowsiness.

Calchi alleges that she bought a product, and would not have purchased the product without the misrepresentation. That’s enough to allege an injury. She also alleges that she paid more for the product than she otherwise would have paid. Based on this complaint, that theory is a bit shakier, but it is enough to get to the next stage of the case. She also alleged a pocketbook injury—she paid more than she otherwise would have—and that was enough at this stage, though the court expressed some skepticism about proof.

Amazon potentially on the hook for marketing mislabeled supplements

Li v. Amazon.com Servs., 2024 WL 4336432, No. 2:23-cv-01975-JHC (W.D. Wash. Sept. 27, 2024)

Plaintiffs alleged that Amazon promoted, sold, and delivered dietary supplements that lacked mandatory FDA disclaimers in violation of California law. Plaintiffs allegedly saw the representations on the “product labels and otherwise” on Amazon’s site and believed “that the [p]roducts harbored therapeutic value, and/or they and the marketing claims were reviewed and approved by the FDA.” Plaintiffs allegedly relied on “Amazon’s stature, representations, and reputation,” its marketing of the dietary supplements, and the “[p]roduct labels and its omissions from the same” when choosing to buy the dietary supplements. They also “purchased more of, and/or paid more for, the [p]roducts” than they would have “had [they] known the truth about the [p]roducts.” As a result, Plaintiffs “lost money” because of Amazon’s conduct and were “exposed to risk of serious bodily injury.”

Amazon allegedly “systematically...promote[s] and sell[s]” dietary supplements that “lack[ ]...mandatory disclaimers from [p]roduct labels.” Many dietary supplements in Amazon’s marketplace allegedly claim to “treat, cure, or prevent various diseases and viruses including...diabetes, high blood pressure, Alzheimer, arthritis, depression, prostate cancer, and others,” when these products have not been “scientifically established as safe or efficacious under the established protocol for drugs, nor are they subject to FDA review and approval.” E.g., this listing for Doctor’s Best Vitamin D3: 

Other companies like Safeway and Target allegedly lawfully label their supplements by not making such claims:

Most of Amazon’s sales come from Amazon’s “Fulfilled by Amazon” (FBA) program, in which Amazon provides services including stocking, maintaining, and storing products at Amazon fulfillment centers; sorting and shipping; and 24/7 customer support for consumers of the products. Amazon controls product listings, communications with consumers about the product, and processing of payments and fees for sale of the product, including Amazon’s service fee. Amazon also purportedly operates an “Industry-Leading Safety and Compliance Program,” which allows Amazon to “ban or delist products” in the marketplace that are “unlawful and/or dangerous.”

Plaintiffs brought both product liability/warranty claims and the usual consumer protection claims under California law.

First, plaintiffs adequately alleged standing, despite Amazon’s argument that the reliance allegations were implausible because the product details and labels showed that all of the products had at least one clear DSHEA disclaimer.

Spending money one would otherwise not have spent is a quintessential injury in fact.

Federal law, which is adopted by California’s Sherman Law, mandates that, if a dietary supplement includes a statement that “describes the role of a nutrient or dietary ingredient intended to affect the structure or function in humans, characterizes the documented mechanism by which a nutrient or dietary ingredient acts to maintain such structure or function, or describes general well-being from consumption of a nutrient or dietary ingredient,” it must also include a DSHEA disclaimer. The disclaimer must be “prominently displayed and in boldface type” and include the text: “ ‘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.’ ” The disclaimer must also “be placed adjacent to the statement with no intervening material or linked to the statement with a symbol (e.g., an asterisk) at the end of each such statement that refers to the same symbol placed adjacent to the disclaimer[.]”Also, “[o]n product labels...the disclaimer shall appear on each panel or page where there such is a statement. The disclaimer shall be set off in a box where it is not adjacent to the statement in question.” Plaintiffs argued that “to be legally compliant, the disclaimer must: (1) appear ‘on each panel or page’ of a supplement label or package that bears a health-related claim; and (2) be ‘prominent.’ ”

Amazon argued that the product labels and product details pages, including the product images on those details pages, include the DSHEA disclaimer in a box titled, “Important information” in “bold orange font.” It further contended that “the product detail[s] pages for multiple [p]roducts include images showing an actual product label with the prominent DSHEA disclaimer.” The structure function claim on the front label of those products was followed by an asterisk that directs a consumer to a DSHEA disclaimer on the back label.

Plaintiffs rejoined that “[b]urying a disclaimer multiple scrolls down on Amazon’s product page, and/or amongst a multitude of voluntary claims and images (which dominate through placement, size, color, contrast), cannot as a matter of law redress illegality, nor can it redress the deception and fraud.”

The court agreed with plaintiffs: “None of the materials introduced by Amazon refute Plaintiffs’ contention that the products omit disclaimers on the primary panels that carry the structure function claim. For example, no image submitted shows a product that includes the required disclaimer on the same panels that carry the structure function claims.” E.g, the Amazon display page for Safrel Vitamin B-12: 

Thus, plaintiffs plausibly alleged that they were misled when purchasing the dietary supplements on Amazon.

Amazon argued that plaintiffs failed to “plausibly allege” that a reasonable consumer would believe that the dietary supplements had “therapeutic value” or had received FDA approval, given the DSHEA disclaimer under the “Important information” section and that the “[p]roduct photographs” and “Amazon.com display page images” for some of the dietary supplements show that the health claims on the front label were “accompanied by asterisks or other symbols that directed the consumer to a DSHEA disclaimer.” Amazon argued that it is “implausible” and “unreasonable” for a consumer to ignore the asterisk.

But Amazon allegedly omitted disclaimers from display panels that carry health-related claims and, as a result, plaintiffs allegedly did not read “disclaimers in conjunction with reading the effusive health claims, which led to their belief in the products’ therapeutic value and safety.” This wasn’t suitable for resolution on a motion to dismiss. Amazon also provided the court with images of the “product detail pages” of the dietary supplements plaintiffs purchased. The product details page for Nature’s Nutrition Turmeric Curcumin stated in bold, black font that the product provides “Natural Joint Support” and “Support[s] Joint and Heart Health[,]”but there is no asterisk next to either of these assertions nor is there an adjacent DSHEA disclaimer: 

This was consistent with plaintiffs’ allegations that the “proximity and prominence” of the DSHEA disclaimers provides consumers with the opportunity to “see and read them in order to be alerted that the products are not therapeutic and thereby avoid deception.”

Amazon argued that plaintiffs’ claims sought to impose vicarious liability on it, which is unavailable for unfair competition claims, as to which “[a] defendant’s liability must be based on [their] personal ‘participation in the unlawful practices’ and ‘unbridled control’ over the practices that are found to violate [California Business and Professions Code] sections 17200 or 17500.” Under the CLRA, “absent allegations of participation or control[,]” the defendant cannot be held liable for the acts of third parties.

Plaintiffs responded that Amazon was “integral[ly] involv[ed] in the unlawful and deceptive marketing, promotion, sales, delivery into interstate commerce, and delivery to Plaintiffs of illegal products.” The court agreed with plaintiffs, citing Amazon’s promotional efforts as well as FBA and Amazon’s control of consumer support and whether returned items could be resold. Plaintiffs sufficiently alleged Amazon’s “unbridled control” over the “unlawful practices.”

Amazon then argued that California’s Sherman Law protected it by exempting “persons engaged in business as wholesale or retail distributors of foods, drugs, devices, or cosmetics, except to the extent that they are engaged in the packaging or labeling of the commodities or they prescribe or specify the manner in which the commodities are packaged or labeled.” (This exemption must “not be construed to repeal, invalidate, or supersede any other section of this part.”) But the “unbridled control” allegations also sufficiently pled around this. “Amazon’s alleged actions in labeling and promoting the dietary supplements exceed the role of a wholesale or retail distributor. The Amazon product pages for the dietary supplements state structure function claims about the products.”

However, the economic loss rule barred the product liability claims. There was no special relationship between Amazon and the plaintiffs.

Implied warranty of merchantability claims did survive.

 

CAFA can't prevent remand to state court where consumer protection claims are all equitable

Haver v. General Mills, Inc., 2024 WL 4492052, No.: 3:24-cv-01269-CAB-MMP (S.D. Cal. Oct. 11, 2024)

Interesting remand to state court. Haver sued under the UCL and FAL, alleging that GM deceptively marketed “Fruit Snacks” to contain “Real Fruit Juice,” when the snacks in question were allegedly sweetened entirely with added sugars. GM removed under CAFA, but the court held that it lacked jurisdiction over Haver’s claims, which were all equitable, and therefore remanded, ruling that CAFA didn’t trump the rule regarding remand when the claims were only cognizable in state court. “[N]o antiremoval presumption attends cases invoking CAFA, which Congress enacted to facilitate adjudication of certain class actions in federal court.” Nonetheless, under 28 U.S.C. § 1447(c), remand is available if the court lacks subject matter jurisdiction.

Although removal was proper, the court continued on to Article III standing, which requires traceable injury and redressability. A plaintiff’s intention to purchase a product in the future is necessary for Article III standing when seeking injunctive relief. “As a general rule, if the district court is confronted with an Article III standing problem in a removed case—whether the claims at issue are state or federal—the proper course is to remand for adjudication in state court.”

The relevant part of the complaint said: “Plaintiff and Class Members are likely to continue to be damaged by General Mills’ deceptive trade practices, because General Mills continues to disseminate misleading information.” But Haver didn’t plead any concrete intention to buy the snacks in the future, meaning she didn’t have Article III standing for injunctive relief.

And Haver’s remaining claims sounded in equity: restitution and disgorgement. Equitable jurisdiction asks whether the “principles governing equitable relief” allow a district court to “exercise its remedial powers.” In that sense, equitable jurisdiction is a “threshold jurisdictional question.” Sonner v. Premier Nutrition Corp., 971 F.3d 834 (9th Cir. 2020). (I did wonder whether defendants’ victory in Sonner could be taken back by plaintiffs, and here we are.)

“Federal courts sitting in diversity can only award equitable relief under state law if there is no adequate legal remedy.” But Haver didn’t plead that she lacked an adequate remedy at law. “[N]othing in the complaint suggests that a damages award for the alleged false advertising type claims would fail to make class members whole.” Thus, the court lacked equitable jurisdiction; the court couldn’t provide the only relief Haver sought.

Numerous abstention doctrines guide courts on remand decision, as well as “longstanding Supreme Court precedent which informs that when a federal court lacks equitable jurisdiction, a case may be remanded.” Cates v. Allen, 149 U.S. 451 (1893); Twist v. Prairie Oil & Gas Co., 274 U.S. 684 (1927). These precedents are binding.

GM argued that they weren’t, because those cases predated the merger of law and equity, and CAFA superseded any discretionary remand decision. “But none of these advancements have altered a federal court’s authority to remand cases ‘where the relief being sought is equitable or otherwise discretionary.’” “Although the Court shares Defendant’s concern for ‘end-runs’ around federal statutes, the principles of federalism and proper judicial administration point to remand where this Court cannot offer Plaintiff any relief under purely state causes of action.” This wasn’t a case where remand would have resulted in piecemeal adjudication—it would be an inevitable loss on the whole claim. (Speaking of end-runs around statutes ….)

 

even after default, court may constrain recovery in competitive market

KHN Solutions LLC v. Shenzhen City Xuewu Feiping Trading Co., No. C 20-07414 WHA, 2024 WL 4351861 (N.D. Cal. Sept. 30, 2024)

I don’t usually blog default judgments, but this one was interesting. It granted interim relief against Amazon.com, impounding funds and products of defendants. KHN makes blood-alcohol concentration breathalyzers; defendants make competing breathalyzers “popularized by fake reviews and false quality assurances on Amazon.” After difficulties serving the Chinese defendants, the magistrate allowed email service and recommended a default judgment.

The district court asked Amazon to comment, since the recommended injunction would burden it. Amazon proposed revisions, including expanding the injunction to cover products newly identified by three Amazon Standard Identification Numbers, and that Amazon transfer defendants’ allegedly ill-gotten gains only after Amazon covered its fees from all those sales.

The recommended injunction didn’t specify the particular breathalyzers for Amazon to discontinue. Amazon and plaintiffs proposed adding identifiers for three specific models of Rofeer-branded breathalyzers, not just one model. The complaint never stated a specific model name, product number, or web address of the complained-of product(s). The complaint’s allegations about fake reviews and poor breathalyzer test results — even when accepted as true — were untethered from specific models. Amazon did suggest that of the many “Rofeer®-branded breathalyzers” it investigated only “certain” products identified “by Plaintiff,” the “B07ZH6PVD4” and “B08CZBL7YS” products, but neither identifier made it into the proposed text of the injunction, and then they proposed to expand it to a third.

“But how can the Court permanently enjoin the sales of three specific products, when there is only an allegation or evidence supporting at most one product being falsely advertised? Plaintiff was required to plead false advertising with specificity, then prove it.” It only did so with evidence as to B07ZH6PVD4.

This is a false advertising case, not a counterfeiting case. Usually, a false advertising injunction stops false statements about products. The recommended injunction would do more:

It would permanently stop defendants from selling their product (including from unspecified sites besides Amazon’s, where no false statements have been shown). It would even order the shipping of offending breathalyzers to plaintiff. And it would permanently disable the defendants’ purported seller accounts, even though the record does not show that defendants’ sole use of these accounts is for selling falsely advertised items.

That would not be justified as a permanent injunction, though interim relief was appropriate.

As for damages, “the proposed injunction permits double, triple, or even sixteen-fold recovery,” by letting the plaintiff recoup “up to the amount of the Court’s damages award” from Amazon, then from financial institutions and payment processors “not limited to” the fifteen listed in the injunction to get “the amount of the Court’s damages award.” “Plaintiff has not established that defendants even have accounts with all third parties.” There were no provisions to avoid double recovery, and even single recovery would be unsupported.

The recommended damages award “exceeds what the law allows, because it impounds all sales revenue, not just plaintiff’s actual damages or defendants’ profits.” The Lanham Act allows compensation, not punitive damages, as measured either by actual damages or defendant’s profits. The plaintiff bears the burden of proving the “defendant’s gross profits from the infringing activity with reasonable certainty.”

But selling always has costs.

Awarding defendants’ total revenues ignores that reality. Similarly, total sales surpass what plaintiff possibly would have earned but-for the purported misconduct. Selling products almost always involves competing against more than one rival for the sale. Here, there were multiple rivals: Plaintiff compares defendants’ product not only to its own but to third-party “Lifeloc’s FC10 police-grade industry standard breathalyzer.” If plaintiff made fewer sales because of defendants, Lifeloc likely made fewer sales, too. Thus, awarding all of defendants’ revenues (or profits) to plaintiff also ignores this reality. Plaintiff makes no substantive or equitable argument to justify such outsized relief.

District courts have awarded damages in trademark infringement cases in the amount of defendant’s sales where no offsetting costs were proven. But trademark infringement involves more direct harm than defendants “who simply made false statements about their own products.” The recommended award here surpassed “what equity allowed, which is the Lanham Act’s limit.” And there were other problems with the proposed award, including that Amazon omitted dollar amounts from its spreadsheet showing sales “ostensibly for confidentiality reasons.” Because of the lack of detail, there was no way to attribute sales to specific models.

Thus, the court ordered Amazon to cease to deal with the defendants/anyone operating for their benefit; impound any products in Amazon’s control that are at issue in this case, specifically including three ASINs; and impound all revenues in the Amazon accounts of persons or entities that have accrued from selling those products. “Upon the Court’s further order, the impounded funds might be released to defendants or possibly to plaintiff — or to someone else, perhaps even to disappointed purchasers. Same goes for the products. But defendants must show up to make their case.”

The court reasoned that impounding would create a fund to allow damages, once properly determined. Impounding was also intended to “get the immediate attention of defendants and to break the cycle of selling into our country but refusing to appear and to defend, meaning to get the attention of defendants and persuade them to appear and to defend on the merits.” If defendants failed to appear, the court would entertain a renewed motion for default judgment.

false "patented/proprietary/exclusive" claims can be actionable despite Dastar

Crocs, Inc. v. Effervescent, Inc., No. 2022-2160 (Fed. Cir. Oct. 3, 2024)

Crocs sued competitors for patent infringement; defendant Dawgs counterclaimed for false advertising about the characteristics of the primary material Crocs uses to make its footwear products, a material it promoted as the “patented,” “proprietary,” and “exclusive” “Croslite.” Dawgs alleged that none of this was true, but that Crocs misled current and potential customers to believe that “Crocs’ molded footwear is made of a material that is different than any other footwear.” The district court, relying on the Federal Circuit’s Baden decision interpreting Dastar, tossed out the claims, reasoning that these terms were Dastar-barred claims of inventorship rather than claims about the nature of Crocs’ products. The court of appeals reversed.

Baden found that claims to have “innovative” technology were Dastar-barred. Baden had argued that Molten’s advertisements were false “precisely because Molten was not the source of the innovation,” i.e., not the author. But “authorship, like licensing status, is not a nature, characteristic, or quality, as those terms are used in Section 43(a)(1)(B) of the Lanham Act.” By contrast, “here, the false claim that a product is patented does not stand alone. Dawgs presents allegations and evidence that the falsity of Crocs’ promotional statements is rooted in the nature, characteristics, or qualities of Crocs’ products.”

Specifically, “[a] claim that a product is constructed of ‘patented’ material is not solely an expression of innovation and, hence, authorship.” In Baden, there weren’t ads “linking such claims to a product’s tangible nature, characteristics, or qualities.” But here, Dawgs alleged promotional statements by Crocs that a patent covers Croslite, paired with statements that “Croslite has numerous tangible benefits.” Thus, the claim “patented” “was used by Crocs to ascribe characteristics that go to the nature and qualities of Croslite.” This plausibly alleged that consumers would be misled about the “nature, characteristics, or qualities” of Crocs’ product.

For-profit company can republish ASTM standards incorporated by reference into law

Am. Soc. for Testing & Materials v. UpCodes, Inc., No. 24-1895 (E.D. Pa. Oct. 2, 2024)

ASTM, which produces technical standards, sued UpCodes  for providing free online access to unauthorized copies of ten ASTM standards, all of which have been incorporated by reference into state and local legal codes. ASTM sought a preliminary injunction based on its copyright and trademark claims, which the court denied.

Over seventy percent of ASTM’s revenue comes from the sale of its standards. Along with individual sales, ASTM sells a publication entitled ASTM Standards in Building Codes that contains over 13,000 ASTM standards including the ten at issue here.

“Although local, state, and federal jurisdictions reference ASTM standards in their laws, it is accepted that ASTM does not lobby the government—or other entities—to reference their standards.” Nonetheless, ASTM’s official form and style manual indicates that certain ASTM standards are “developed for reference in model building codes.” Plus, “when ASTM standards are adopted into law, ASTM can market its own compliance-focused training materials.”

UpCodes is a for-profit start-up, which only publishes standards that, in its view, have been adopted into law by specific jurisdictions. Users of the UpCodes website can filter their searches by jurisdiction or by the original publisher of the adopted standard. Any user with an UpCodes account can freely view and copy a supported jurisdiction’s laws , and they can also purchase a subscription to access UpCodes’ premium features, including bookmarking, annotating, and automation tools. Posting these standards therefore “may provide UpCodes with tangential benefits like drawing users to its website, increasing active account numbers, and enabling the collection of user information.”

Each unauthorized copy that UpCodes posted at issue here includes what ASTM describes as “expressly non-mandatory” material, such as explanatory notes, supplementary materials, appendices, and Annexes. UpCodes identifies ASTM as the original publisher. Since promulgating the ten standards at issue, ASTM has published updated versions of nine of them.

When a standard is incorporated by reference,

the incorporated standard may be enforced against regulated entities without being included in the text of the law itself. When this happens, a regulated entity will not find the text of the standard that details their legal obligations in the official public code. They must look elsewhere to access the content of the standard. Often, that access comes with a price. The private standard-developing organizations that create these referenced standards typically copyright their work and charge fees for users to access them.

When federal agencies incorporate by reference privately authored materials, federal law requires copies of incorporated standards to be, at a minimum, available for public inspection at the Office of the Federal Register’s reading room in Washington D.C., and in the promulgating agency’s public library. ASTM also operates an online read-only reading room (with no print or download options) for ASTM standards that have been incorporated into federal law.

But no such law regulates state or local government incorporation by reference. The standards at issue in this case were not available online for free before UpCodes posted them. Although incorporation by reference can save money and work, it can create “serious notice and accountability problems.” “[P]lacing legally binding standards behind paywalls undermines the ‘principle that [government] should provide regulated parties fair warning of the conduct [a regulation] prohibits or requires.’” This may also hinder mechanisms of democratic accountability.

Incorporation by reference can also occur indirectly: A government incorporates by reference a third-party publication. That publication incorporates by reference a separate privately authored standard. Whether incorporation by reference is direct or indirect, neither involve having “the content of the technical standard reprinted in the text of the law itself. Thus, people are typically unable to view the content of these standards unless they pay a fee.”

The Philadelphia Building Code states that the 2018 International Building Code “is incorporated as if fully set forth herein, subject to [] local amendments.” As the IBC’s Chapter on Referenced Standards explains, “[t]he International Building Code contains numerous references to standards promulgated by other organizations that are used to provide requirements for materials and methods of construction . . . . These standards, in essence, are part of this code to the extent of the reference to the standard.” The ten ASTM standards at issue are so incorporated. If individuals violate the Philadelphia Building Code, they can face fines of up to three hundred dollars a day per violation.

Reading the fair use factors in light of copyright’s purposes, UpCodes’ copying was likely to be fair use.

Factor one “considers the reasons for, and nature of, the copier’s use of an original work.” The court deemed UpCodes’ use of the standards “largely noncommercial,” since it didn’t derive any direct monetary profit from publishing them. And the transformative nature of the use outweighed its status as a for-profit company. “UpCodes achieves the distinct objective of making the law freely accessible and educating the public on the contents of binding laws. Unlike ASTM, UpCodes seeks neither to publish industry best practices nor to ‘positively impact[] public health and safety’ by developing high-quality technical standards.” This use had a different character and further purpose from ASTM’s use.

The court declined to see both purposes as “providing information to professionals.” UpCodes focused on standards that have been enacted into law, while ASTM sought to publish standards that improve safety and performance. One objective indication of that different purpose (following Warhol) that weighed in UpCodes’ favor was that ASTM has updated 9 of the 10 standards, but UpCodes doesn’t publish the updated versions because they’re not the law, showing that the reasons for copying were different than ASTM’s reasons for publishing. (Although this isn't a big data case, it follows the pattern, which Warhol may have accelerated, of courts being more confident in identifying different purpose in identical copies than different "character" when the latter requires assessing the meaning of physical changes to the copied work.)

In addition, the use was “justified because it furthers the goal[s] of copyright,” including “enriching public knowledge.” And it was “justified because copying is reasonably necessary to achieve [UpCodes’] new purpose.” As UpCodes explained, “[i]f [it] attempted to express that law using other words . . . it would not be publishing the law of Philadelphia.” The DC Circuit’s decision in Public Resource was persuasive, even though UpCodes is not a nonprofit, given the mostly noncommercial nature of the use. Although the explanatory notes, supplementary materials, and appendices weren’t binding, the court agreed with the DC Circuit that, “because law is interpreted contextually, even explanatory and background material will aid in understanding and interpreting legal duties” and, like legislative history, such materials “may prove [] important for resolving ambiguities in the portions of standards that set forth the directly binding legal obligations.”

Factor two: Technical standards generally “fall at the factual end of the fact-fiction spectrum, which counsels in favor of finding fair use.” And because “the express text of the law falls plainly outside the realm of copyright protection,” “standards incorporated by reference into law are, at best, at the outer edge of ‘copyright’s protective purposes.’” The nature of the work, that is, is that it has been incorporated into law, weighing “heavily” in favor of fair use.

Factor three: It’s ok to copy the whole thing when that’s reasonable in relation to the purpose and character of the use. “[T]his amount of copying was plainly reasonable in relation to UpCodes’ objective.” Like the DC Circuit, the court agreed that this factor “strongly” supported fair use because the copying was limited “to only what is required to fairly describe the standard’s legal import.”  

Factor four: Following Google v. Oracle’s directive that “a potential loss of revenue is not the whole story,” the court analyzed both the source of any market harm and the countervailing public benefits of the copying. Courts must consider “whether enforcing a copyright will allow the copyright holder to gain profits that would ‘interfere with, not further, copyright’s basic creativity objectives’” and balance the monetary effects against the public benefits, a consideration that was “especially weighty” when it came to standards that have been given the force of law.

Using this analysis, the fourth factor didn’t weigh clearly in either side’s favor. It was “plain” that free availability from UpCodes would have a market effect on purchases of the standards from ASTM.  Nonetheless, copyright “should not grant anyone more economic power than is necessary to achieve the incentive to create,” and “ASTM may have other incentives to continue developing technical standards even if some of its standards lose their copyright protection after being enacted into law”: “its mission of promoting product quality and public safety, its professional interest in being recognized as a global leader in standard development, and other monetary benefits that it may derive after its standards are incorporated into law, like profits derived from marketing its own compliance-focused training materials.”

And of course the countervailing public benefits were substantial—there was no requirement that referenced standards enacted by state and local jurisdictions be publicly available, but significant practical value to the public of unfettered access to such incorporated standards. “For example, journalists have explained that this access is essential to inform their news coverage; union members have explained that this access helps them advocate and negotiate for safe working conditions; and the NAACP has explained that this access helps citizens assert their legal rights and advocate for legal reforms.”

Weighing the factors, the use was fair. After all, copyright law is not designed for the primary purpose of providing “a special private benefit” to authors like ASTM. The court didn’t see why incorporation by reference was any different from direct incorporation into law for fair use purposes, since the legal consequences were “virtually indistinguishable.” (Is it even “virtually” indistinguishable? Maybe for the commentary.)

Trademark: This was nominative fair use. In nominative fair use cases, “the alleged infringer uses the trademark holder’s mark to describe the trademark holder’s product, even if the alleged infringer’s ultimate goal is to describe his own product.” Like car mechanics identifying VWs as among the types of cars they repair, UpCodes used ASTM’s mark in a nominative manner. And “the only practical way” for UpCodes to refer to them was to use the term, because the entities that incorporated the standards into law did so.

In the Third Circuit, courts use a modified LOC case in nominative use cases. Under that test, two usually key factors—similarity between the owner’s mark and the allegedly infringing mark, and strength of the owner’s mark—are ignored (because in a NFU situation they wouldn’t actually bear on likely confusion/the use is justified even, or especially, because it’s identical to a strong mark). Although district courts have discretion, four other factors are likely to be relevant: (1) the price of the goods and other factors indicative of the care and attention expected of consumers when making a purchase; (2) the length of time the defendant has used the mark without evidence of actual confusion; (3) the intent of the defendant in adopting the mark; and (4) the evidence of actual confusion. Only if those factors favor a likely confusion finding does the burden shift to the defendant to show that it’s satisfied the NFU test. ASTM didn’t make it to the burden-shifting stage.

Here, length of defendant’s use was short and thus not very probative one way or another. But the relevant consumers were sophisticated: ASTM’s standards are “targeted at technical people” including “engineers, architects, builders, and suppliers and manufacturers of construction materials.”

UpCodes’ intent was not to “confuse or deceive consumers as to the product’s source . . . .” Instead, “ASTM” was the only practical way to refer to the standards; its intent was accuracy.

And there was no evidence of actual confusion.

Thus, there was no likely success on the merits.

(It’s not even obvious that there’s more to do for summary judgment, certainly on the copyright claims.)

republishing scientific study to prospective customers isn't protected opinion

Advance Dx, Inc. v. YourBio Health, Inc., --- F.Supp.3d ----, 2024 WL 4393314, No. 24-10595-WGY (D. Mass. Oct. 3, 2024)

Advance sued YourBio, which competes in the market for at-home medical device testing patients’ level of anti-Mullerian hormone, for false advertising, tortious interference, defamation/disparagement, unjust enrichment, and unfair trade practices under Massachusetts statutory law.

Advance makes a card used to collect a blood sample obtained from a patient’s lanced fingertip, while YourBio manufactures a device that is used to collect a blood sample by attaching to the back of a patient’s arm and piercing capillaries close to the skin’s surface with microneedles. In 2022, BioMed studied the parties’ products and conventional venipuncture. “After processing the data, BioMed imposed an internal control, calculated based on the Study’s data, to normalize Advance’s results to the venipuncture instead of using the recommended internal control provided in Advance’s guidelines.” It then published the study, concluding that YourBio’s testing device was more accurate, superior, and has stronger consumer preference than Advance’s. YourBio used PR Newswire to tout its superiority and also repeatedly promoted the study “to consumers, industry professionals, and third parties at trade shows and in YourBio’s marketing materials.” However, after it learned about the use of the simulated control, the testing lab “stated that any discordance noted in the Study may be due to BioMed’s failure to follow Advance’s instructions for the Card, and not due to any fault of the Card.”

YourBio argued that the study was a non-actionable scientific conclusion and statement of opinion and therefore could not be falsified. The court disagreed. Even under the rule of ONY, Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490 (2d Cir. 2013), “we must take into account the statement’s context, including the medium in which the statement was published and the audience to which it was presented.” The medium here was republication by YourBio specifically to promote its devices. “Unlike a typical scientific journal, the medium in this case is not meant to communicate insights into matters of scientific debate, despite the fact that the Study may have been first published by BioMed for exclusively scientific reasons.” The audience was also not “purely scientific,” but rather targeted at customers/potential customers.

The court also found that Advance was not a public figure, so defamation required only negligence, although it did plead that YourBio was aware of the falsity. And damage could be presumed without evidence of economic loss because the statements were of the kind that would harm Advance’s business.

The same basic logic allowed the Lanham Act false advertising claims to proceed. (Advance didn’t say a lot about “interstate commerce,” but alleging that the false statements were published online sufficed.) Unfair trade practices under Chapter 93A MGL are treated the same way as Lanham Act false advertising claims, so they also survived.

Tortious interference and commercial/product disparagement claims likewise survived. Under Massachusetts law, “[p]roduct disparagement is similar to defamation but lacks a reputational harm element and makes greater demands as to the ‘falsity of the statement[s], fault of the defendant and proof of damage.’ ”  That didn’t make a difference here.

Unjust enrichment claims failed, however, because Advance didn’t plead it had the right to some benefit/money that YourBio received.

9th Circuit refuses to kick out claim over benzene in sunscreen on standing

Bowen v. Energizer Holdings, Inc., --- F.4th ----, 2024 WL 4352496, No. 23-55116 (9th Cir. Oct. 1, 2024)

Bowen sued Energizer for false advertising, alleging that its Banana Boat sunscreen was adulterated with dangerous levels of benzene, a carcinogen that scientists have determined can cause cancer.

Energizer moved to dismiss under Rule 12(b)(1), arguing that there was no Article III standing because Bowen’s allegations that small amounts of benzene in sunscreen are unsafe were false. The district court held that “[i]n light of the [FDA] guideline permitting 2 [parts per million] of benzene in sunscreen, [Bowen] does not allege facts that tend to show a non-speculative increased health risk or actual economic harm” arising from her purchase of Banana Boat products. This was a premature resolution of the merits issue. “Although a district court faced with a factual challenge to its exercise of jurisdiction may resolve disputed facts as to purely jurisdictional questions, it may not do so when those jurisdictional questions are intertwined with the merits of a claim. When the jurisdictional and merits issues are inseparable, the court must treat a factual attack on jurisdiction as a motion for summary judgment and construe disputed issues of fact in favor of the nonmoving party. Applying that standard here, Bowen has adequately established an injury in fact for purposes of Article III.” Remanded.

Bowen had one bottle of the sunscreen tested at a lab, revealing that it contained 0.29 parts per million (“ppm”) of benzene. A non-party pharmacy also allegedly tested various Banana Boat products and found that they too contained benzene, including a bottle with more than 0.1 ppm of benzene.

Bowen alleged that “[b]enzene is a carcinogen that can cause cancer in humans,” and that “the application of sunscreen specifically increases the absorption rate of benzene through the skin.” A Yale researcher, clinician, and professor of dermatology allegedly opined that “[t]here is not a safe level of benzene that can exist in sunscreen products,” given the large surface area of the human body and the amount of sunscreen needed to properly cover it. This contamination allegedly has led to public concern and voluntary recalls of Banana Boat products.  

Looking to documents produced or relied on by the FDA, the district court determined that they “impl[y] that manufacturers like Defendants may continue to release products that are adequately tested and contain less than 2 ppm of benzene.” It further held that Bowen’s “alleged economic harm”—i.e., that she paid more than she would have had she known that Banana Boat contained benzene—“is premised on the speculative notion that the presence of 0.29 ppm of benzene, or any potential presence of benzene, makes the sunscreen unsafe.”

Bowen’s allegations relating to standing weren’t “separable from the merits of the case,” but rather “intertwined with an element of the merits of the plaintiff’s claim,” such that the district court was required to “leave the resolution of material factual disputes to the trier of fact.”

When plaintiffs in a false advertising case “ ‘contend that [they] paid more for [a product] than they otherwise would have paid, or bought it when they otherwise would not have done so’ [because of a false claim or misleading omission] they have suffered an Article III injury in fact.” Whether the statements they relied on were materially false was also a merits issue. These allegations weren’t separable from the merits.

The district court thus “mistakenly required Bowen to show that Banana Boat was noncompliant with FDA guidelines in order to establish injury under an economic-harm theory.” Her alleged overpayment was the harm, not the safety/risk profile. In addition, to find 0.29 ppm benzene “safe” was to improperly weigh disputed evidence. The court of appeals pointed out that, even without considering Bowen’s countervailing evidence, the FDA hardly blessed the presence of benzene at any level in the relevant documents. Its guidance was that benzene “should not be employed in the manufacture of ... drug products because of their unacceptable toxicity or their deleterious environmental effect. However, if their use is unavoidable in order to produce a drug product with a significant therapeutic advance, then their levels should be restricted” to 2 ppm, “unless otherwise justified.” That “caveat-laden” guidance was hardly a safety endorsement. “Faced with two sunscreens in the skincare aisle of a pharmacy—one with benzene, the other with no benzene—it is perfectly reasonable that the consumer would avoid the product containing benzene, as Bowen alleges that she would have absent Defendants’ alleged false advertising.”

Revisiting the Silvertop banana costume case

Silvertop v. Kangaroo (3d Cir. 2019) held that a banana costume was both copyrightable and infringed:

In holding that the costume was protectable, the Third Circuit reasoned:

Although a banana costume is likely to be yellow, it could be any  shade of yellow—or  green or brown for that matter. Although a banana costume is likely to be curved, it need not be—let alone in any particular manner. And although a banana costume is likely to have ends that resemble a natural banana’s, those tips need not look like Rasta’s black tips  (in color, shape, or size).

Commenting on this reasoning, Jamie Boyle and Jennifer Jenkins said: 

So, while the court admits that a banana costume is likely to be yellow and curved, it says it could also be brown and straight. On Halloween, when your child goes out in her brown, straight, banana costume and her friends ask “why are you dressed up as a stick!?” she will be able to respond with a simple, terse explanation. “Star Athletica,” she will say.

(It's not really Star Athletica that is the direct culprit, but the court's cramped understanding of scenes a faire/basic designs; Star Athletica just means that all the limiting work is done by idea/expression and similar doctrines, and the court misapplied Star Athletica's holding that the designer's intent is irrelevant to separability to the separate issue of whether the designer did something creative/original.)

Anyway, the court has a possibly better argument: "copyrighting Rasta’s banana costume would not  effectively monopolize the underlying idea because there are many other ways to make a costume resemble a banana.  Indeed, Rasta provided over 20 non-infringing examples."

So I decided to take a look at the record.

First, there aren't "over 20"--there are 21 pictures, 2 of which are of a costume from Arrested Development. (I only used one of those two pictures.) Of the 20 costumes--treating minor variations as different costumes--3 are "sexy" bananas, a different 6 cover the face, 1 is a guy in a yellow suit with a hood, and 1 is an odd Wolverine. Maybe that's still enough to justify protection for Rasta's version, but the fact that no one noticed Wolverine in there suggests to me that principles of equity were doing more work than copyright principles.

On the other hand, the court isn't really suggesting that noninfringing costumes need to be straight and brown or green. Yay?

 

"natural" class certified based in part on internal acknowledgement of materiality and potential falsity

Drake v. Bayer Healthcare LLC, 2024 WL 4204921, No. 22-cv-1085-MMA (JLB) (C.D. Cal. Sept. 16, 2024)

Plaintiffs alleged that Bayer falsely advertised One A Day Natural Fruit Bites Multivitamin products as “natural” even though they “contain non-natural, synthetic ingredients.” They brought claims under NY and California law. The court certified plaintiff classes. I’ll just make a few notes.

Materiality: “[P]laintiffs must offer some means of providing materiality and reliance by a reasonable consumer on a classwide basis in order to certify a class.” Here, named plaintiffs’ depositions, Bayer’s internal documents, and a materiality survey were sufficient. Particularly notable: Bayer had internal debate about “natural.” Its senior brand manager wrote that the “Regulatory [department] did not support” the use of the word “natural” on the labels “based on the presence of vitamins (which are synthetic) in the formula.” But Bayer’s vice president of marketing mentioned that she “would keep [the word “natural”] to test ...” because “[c]onsumers loved those words ...” This was enough to support, for purposes of certification, the claims that a reasonable consumer would attach importance to “natural” and that Bayer knew this. The survey was also fine—the battle of the experts also created a common question of fact. With materiality comes a presumption of reliance.

Bayer also argued that plaintiffs failed to present a workable damages model. But “class wide damages calculations under the CLRA are particularly forgiving[,]” because “California law requires only that some reasonable basis of computation of damages be used, and the damages may be computed even if the result reached is an approximation.” Plaintiffs’ expert proposed a “choice-based conjoint survey methodology,” which will “measure the value of an individual product attribute, such as a specific understanding of the label” and in turn will help “determine the price premium attributable” to the label claims. That was a well-established method for measuring classwide damages in false advertising product label cases.

 

Copyright preemption in trade dress claims?

Scotts Company LLC v. SBM Life Science Corp., --- F.Supp.3d ----, No. 2:23-cv-1541, 2024 WL 4217446 (S.D. Ohio Sept. 18, 2024)

Scotts makes consumer lawn, garden, pesticide, and insecticide products, including under the “ORTHO” brand. Scotts alleged rights in its red mark, black trade dress, black label, and yellow barrier design that were allegedly infringed by competitor SBM’s competing products. Unsurprisingly, the court accepts those claims on a motion to dismiss, but seems to get the copyright preemption analysis backwards.

Scotts sufficiently alleged fame for dilution purposes.

Ortho red design mark

The allegations were, along with pictures, sufficient to allege a defined, distinctive trade dress:

The distinctive packaging of certain Scotts’ ORTHO control products consists of a unique arrangement of colors, graphic elements, font styles and text, with a black background with some lighter gradations of gray, a prominent placement of a red pentagon containing a brand name in white lettering above horizontal information bars that start on the left side of the label and connect into a circular or arc design that contains an image of green plant material. One information bar is yellowish/gold and the other information bar is silver. A product name is placed between the pentagon design and the information bars.

Ortho black trade dress

This was sufficiently definite; it didn’t include terms like “such as” or “for example,” which can be problematic.

However, coordinate state law claims under the Ohio Deceptive Trade Practices Act were preempted by §301 because the alleged extra element—the fact that the copied matter was put on products and sold on products that compete with Scotts’—didn’t qualitatively distinguish Scotts’ copyright claim from its trade dress claim. “[B]ased on Scotts’ allegations, the source of any likelihood of confusion—the extra element required to advance Scotts’ state-law claims—is the same activity that forms Scotts’ copyright claim,” so it wasn’t qualitatively different. (As TM gets more property-like, this argument may be more attractive to courts; when “confusion” is more notional than real, it seems less like an extra element.)

The court did find a copyright claim based on label similarity plausible. “Each [label has] a primarily black background, lighter gradations of gray, a prominent placement of a red pentagon containing white lettering where the brand name is, and horizontal information bars in yellowish/gold and silver that extend from the left side of the label to a circular image depicting green plant material.”

accused SBM trade dress--I really can't see substantial similarity of protectable expression here; this seems to conflate (c) and TM

The court doesn't separately deal with the copyright claim over the yellow barrier design, which to me clearly falls on the idea side of the idea/expression line:

False advertising: Scotts challenged SBM’s advertising statements that its Brush Killer Product kills brush for up to 12 months, protects for up to 12 months, and provides consumers with up to 365 days of control. Scotts alleged that the products do not provide the advertised protection for up to 12 months or 365 days; that was sufficient to allege falsity. At least the court is equally lenient with TM and false advertising?

"Made in the USA" materiality showing requires evidence, not just interested witness testimony

Illinois Tool Works Inc. v. J-B Weld Co., No. 3:19-cv-1434 (JAM), 2024 WL 4117244 (D. Conn. Sept. 9, 2024)

The parties compete in the sale of “chemical bonding products marketed for home and automotive use.” Here, the court kicks out Lanham Act claims/counterclaims on summary judgment for want of materiality—for “Made in USA” and the term “epoxy”—as well as another claim on laches grounds. The first one’s the potential surprise, and raises evidentiary questions about hearsay that a court in a trademark case might have seen differently.

J-B has used unqualified “Made in USA” claims in its advertising. The parties disputed whether J-B’s silicone sealants, manufactured by its suppliers, contain ingredients sourced from abroad and the significance of those ingredients.

ITW advertises “the interchange between its products and the matching OEM manufacturer products” in its materials, sometimes including OEM interchanges for specific automotive brands in its package advertising. It also marketed certain products as epoxies despite their not fitting the chemical definition of an epoxy. The parties agreed that “an epoxy is a polymer containing one or more epoxy or epoxide groups,” and that adhesives containing epoxides are distinct from adhesives containing methyl methacrylate (“MMAs”), and they have distinct health and safety concerns. ITW’s accused products didn’t contain chemical epoxide groups, but it categorized them as epoxies on its website. It took the position that, “from a marketing perspective, the definition of an epoxy is any two-part adhesive,” regardless of its specific chemical composition. J-B Weld disagreed and cited a few Amazon reviews in which customers say things like “Is this epoxy or just adhesive?”; “Can anyone tell me if this has methyl methacrylate (mma)? that’s what i want but i can’t tell for sure”; “What is the base chemical of this glue—epoxy, methacrylate, or polyurethane?” Some of ITW’s technical product data sheets did differentiate between “the ‘chemical type’ of an epoxy and a non-epoxy,” identifying differences in odor and flashpoint, among other product characteristics.

ITW didn’t submit sufficient evidence of the materiality of “Made in USA,” offering only “two deposition excerpts in which ITW employees offer their opinions and vague impressions on the issue.” The former director of marketing testified that consumers “definitely” purchase products “based on Made in the USA advertising.” He elaborated: “Because of the type of consumer that shops for our products in general, the profile are people that highly value Made in the USA.” He said that Walmart told his team that “made in the USA is a priority for them.” The court deemed this hearsay and thus irrelevant for summary judgment—but I wonder whether it could also be characterized as evidence of the speaker’s mental state. Regardless, “[c]ourts that have deemed ‘Made in USA’ claims material have been offered much richer evidentiary records,” including actual retailer testimony.

In addition, ITW didn’t show actual injury; in the Second Circuit, literal falsity alone isn’t enough to presume injury in the absence of comparative advertising as well as direct competition. This wasn’t comparative advertising (or a two-player market).

OEM: The court found laches; ITW had used OEM advertising since 2001 and J-B didn’t sue until 2020. J-B argued that the relevant period should begin in 2014, when J-B entered the market, and that it wasn’t unreasonable for a new market entrant to wait to sue the most significant competitor. But that still didn’t excuse six years of delay (where the relevant state period was three years). And ITW was likely to be prejudiced “by being forced to discontinue a marketing strategy it has relied on for so many years and with the risk that customers will assume—in the absence of OEM labeling claims—that the formulation of its products have changed.”

Epoxy: In J-B Weld Co., LLC v. Gorilla Glue Co., 978 F.3d 778 (11th Cir. 2020), J-B lost a false advertising claim against a different competitor based on the competitor’s use of the term “epoxy” in advertising its non-epoxy MMA-based product. The court of appeals reasoned that “consumers likely categorize ‘epoxies’ as all two-part resin-and-hardener adhesives, regardless of the chemical constitution of the resin.” It cited the testimony of J-B’s own expert “that consumers likely only care about whether the product sticks two surfaces together effectively.” Even if there were “safety and odor” differences, there wasn’t a showing of materiality.

The record here wasn’t sufficiently different from that in Gorilla Glue. A “smattering” of Amazon reviews was insufficient to change anything. J-B’s own CEO’s opinion about whether ITW’s epoxy claim would affect consumer purchasing decisions didn’t help because he wasn’t qualified expert on consumer purchasing decisions, and “his self-interested opinion about consumer purchasing decisions exceeds the limits of permissible lay opinion testimony that must be based on a witness’s own sensory perception.”

In the alternative, J-B also failed to show injury from either the OEM or epoxy advertising. Its 30(b)(6) witness testified that various retailer customers told them that J-B was losing business because ITW used “OEM” labels and J-B didn’t, but that was hearsay. Even nominal damages required evidence of injury.

 

Engagement rings in the news

 I'm quoted in this story about a dispute in front of the Massachusetts Supreme Judicial Court this week. In the courts of talking to the reporter, I learned that there have been a couple more state supreme court cases since I last looked, including one, Cummins v. Goolsby, 255 So.3d 1257 (Miss. 2018), in which the court refused to follow the no-fault, man always gets the ring back rule, but only because he was still married to someone else when he gave her the ring. (You can read my student note on the topic, of which I'm still very proud, here.)

DC Court of Appeals revives greenwashing suit against Coca-Cola

Earth Island Institute v. Coca-Cola Co., --- A.3d ----, 2024 WL 3976560, No. 22-CV-0895 (D.C. Aug. 29, 2024)

Earth Island sued Coca-Cola under the D.C. Consumer Protection Procedures Act, alleging that Coca-Cola engages in deceptive marketing that “misleads consumers into thinking that its business is environmentally sustainable, or at least that it is currently making serious strides toward environmental sustainability.” In fact, Earth Island alleged, “the sheer scale on which Coca-Cola relies on single-use plastics in its packaging—and the scale on which it intends to continue using them—renders it an environmental blight and a fundamentally unsustainable business.” Coca-Cola touts its efforts to increase recyclability and use more recycled material, but this allegedly hid “the reality that recycling is not a viable means of mitigating the environmental harm that Coca-Cola inflicts via its mass production of single-use plastics—less than ten percent of recyclable plastics are in fact recycled in the United States.” Coca-Cola allegedly “represents itself as working toward environmental sustainability, despite no serious intention of doing the one thing that could actually achieve that goal: severely scaling down its plastic production.”

The court first found that Earth Justice had standing under DC law (the DC courts are not Article III federal courts). Despite the patchwork of sources—Twitter, the Coca-Cola website, other places—from which the complaint quoted, it was plausible that the general public targeted by the ads, including in DC, received the basic message “that Coca-Cola is a company that cares about, and is working meaningfully toward, environmental sustainability” even if no one person saw all the ads.

Reversing the trial court, DC’s highest court held that this greenwashing complaint stated a claim.

The most concrete statements outlined Coca-Cola’s goals: (1) “Make 100% of our packaging recyclable globally by 2025. Use at least 50% recycled material in our packaging by 2030” And (2) “Part of our sustainability plan is to help collect and recycle a bottle or can for every one we sell globally by 2030.” Vaguer statements were more in the vein: “Business and sustainability are not separate stories for The Coca-Cola Company—but different facets of the same story.” And Coca-Cola cosigned a statement from the American Beverage Association: “Together, we’re committed to getting every bottle back. ... Our goal is for every bottle to become a new bottle, and not end up in oceans, rivers, beaches and landfills. ... This unprecedented commitment includes ... [p]artnering with [other organizations] to improve recycling access, provide education to residents and modernize the recycling infrastructure in communities across the country.”

Earth Island specifically alleged that Coca-Cola wasn’t taking the steps necessary to meet its concrete benchmarks of (1) making 100% of its packaging recyclable by 2025, (2) using 50% recycled material in its packaging by 2030, and (3) recycling a bottle or can for every one it sells by 2030. And, it argues, Coca-Cola has a “history of making sustainability promises and failing to deliver on them,” which is “a history that is bound to repeat itself given that none of Coca-Cola’s business plans or lobbying efforts would enable it to actually achieve its alleged recycling goals.” Also, given low recycling rates, even if Coca-Cola could hit the benchmark of making 100% of its packaging recyclable by 2025, it would allegedly still be “push[ing] ineffective ‘recycling’ as a viable tool to assuage their environmental pollution.”

The trial court thought that the challenged statements were merely aspirational/puffery.  But “even aspirational statements can be actionable under the CPPA because they can convey to reasonable consumers that a speaker is taking (or intends to take) steps that at least have the potential of fulfilling those aspirations. Earth Island alleges that Coca-Cola neither takes nor intends to take any such steps, and if that is correct, then its representations could mislead reasonable consumers.”

It was facially plausible that

(1) Coca-Cola is a fundamentally unsustainable business because of its heavy reliance on single-use plastics that it has no immediate intentions of eliminating or substantially reducing; (2) Coca-Cola misleads consumers into thinking that it is serious about hitting its specific sustainability goals, when its practices say otherwise; and (3) Coca-Cola’s statements create the misimpression that recycling is a viable method for substantially mitigating the harm its plastic products cause to the environment, when it is not.

The court analogized to marketing “light” or “low tar” cigarettes; marketing them as a healthier option was misleading when they didn’t offer much if any benefit versus full tar and when they posed substantial health dangers. Given how Coca-Cola promotes its “World Without Waste” initiative and trumpets how it is “[s]caling sustainability solutions,” “a reasonable consumer could plausibly think that its recycling efforts will put a serious dent in its environmental impacts.” But Earth Island plausibly alleged that it wouldn’t given low recycling rates of recyclable plastics. “That is, when it promotes its recycling efforts, it omits the fact that those efforts will not prevent the vast bulk of its plastic products from ending up as waste or pollution, a deception that Earth Island alleges Coca-Cola very much intends.” Likewise, it was plausible that “a reasonable consumer would think Coca-Cola was taking the steps necessary to achieve its stated goals,” and it allegedly was not.

Of course, this was all subject to proof:

We do not presume to know what reasonable consumers understand a company to mean when it claims that it is working to be “more sustainable” or the like. For all we know, reasonable consumers would immediately dismiss that type of speech as vacuous corporate jargon, not to be relied upon. But that is not obviously true; the concerted efforts that companies like Coca-Cola make to cultivate an image of being environmentally friendly strongly suggests that even their vague assurances have a real impact on consumers. Further, even if reasonable consumers take Coca-Cola’s statements to mean that it is taking substantial strides to improve the environment, it is not at all obvious at this stage of the proceedings whether Coca-Cola’s efforts on the ground align with those statements. But those are questions of proof that cannot be settled at the motion to dismiss stage.

So, puffery was still an issue, but it was an issue for the factfinder.

The court rejected “more rigid approaches” to puffery, such as that where a statement’s “truth or falsity ... cannot be precisely determined,” it is puffery. But the cited case that puffery includes “the exaggerations reasonably to be expected of a seller as to the degree of quality of his product, the truth or falsity of which cannot be precisely determined.” The first part of that definition—reasonably expected exaggerations—was vital to the second. “[B]usinesses cannot insulate themselves from suit simply by avoiding concrete claims. Vague and ambiguous statements, incapable of being strictly true or false, may yet be actionable as misrepresentations.” The court here preferred defining puffery as (1) “general claim[s] of superiority ... so vague that [they] can be understood as nothing more than a mere expression of opinion,” and (2) “exaggerated, blustering, and boasting statement[s],” quite capable of being adjudged false, but “upon which no reasonable buyer would be justified in relying.” “Red Bull gives you wings” can’t be taken literally, but “might be actionable if it gave reasonable consumers the impression that Red Bell provided significant benefits over a cup of coffee or caffeine pill, at least if that were not the case.” In short, “statements that might be deemed puffery if interpreted to mean one thing in one context, might very well be actionable misrepresentations if taken to mean a different thing in a different context. The doctrine is not conducive to hard-and-fast rules, and typically raises a question for the factfinder.”

The court also rejected Bimbo Bakeries USA, Inc. v. Sycamore, 29 F.4th 630 (10th Cir. 2022), which overturned a jury verdict finding that a bakery engaged in false advertising when it billed baked goods it sold in Utah as “local,” despite the fact that they were made exclusively out-of-state, as far away as Alaska. The Bimbo Bakeries court concluded that the word “local” was “an indeterminate and unverifiable adjective,” so it was not any “description of fact,” because “the word local cannot be ‘adjudged true or false in a way that admits of empirical verification.’ ” Of course “local” has a range of meanings.

[I]t is just as obviously true that some things fall outside that range of meanings, often depending on context. To illustrate, here in the District, if somebody says they support the “local” NFL team, you would most naturally think they are supporters of the Washington Commanders, though they might also fairly be referring to the Baltimore Ravens, given that Baltimore is less than forty miles away (i.e., there’s a range that “local” might fairly apply to). But if they are in fact fans of the Los Angeles Rams—a team that hails from more than two thousand miles from here (just as some of the baked goods in Bimbo Bakeries came from Alaska, more than two thousand miles away from Utah)—then they have undoubtedly deceived you.

The court here also specifically rejected Bimbo Bakeries’s “hostility toward consumer survey evidence as one viable evidentiary tool for discerning how reasonable consumers understand various advertisements.” The court further noted that the Fifth Circuit’s analysis in Papa John’s contradicted Bimbo Bakeries—Papa John’s held that even a claim as vague and opinion-laced as “Better ingredients. Better Pizza.” could be actionable “when coupled with a comparison to a competitor’s ingredients that were not discernibly different.”

Nor was it dispositive that the statements were aspirational. An aspirational statement can be reasonably “interpreted to be a representation about the defendant’s present intent ... to act as stated.” Mere failure to achieve stated goals couldn’t support a misrepresentation claim, but a showing that Coca-Cola never even intended to do anything that could achieve them would.

Coca-Cola next argued that the statements at issue weren’t about “goods and services” as required by the CPPA. But claims about plastic packaging were very much about “goods and services,” defined broadly in the law to include “any and all parts of the economic output of society, at any stage or related ... in the economic process.”

Finally, the statements could properly be considered in the aggregate, although a litigant would not be allowed to “unfairly strip isolated statements out of their context and then cobble them together to form an unrepresentative tapestry of what has been conveyed.” Earth Island was targeting only statements that Coca-Cola was still making today. Discovery and trial could be reasonably tailored to those. Earth Island was not offering a “grab bag” of statements nor arguing that they should be read out of context. “Businesses can drive points home through repetition or supplementation, and where a consumer sees Coca-Cola billing itself as sustainable in one ad on a Monday, and then sees a different ad on Thursday with a similar message, the mere repetition of a point can have a cumulative effect on a reasonable consumer.” Maybe consumers wouldn’t have reacted that way, maybe not; “[i]t is plausible enough that a consumer curious about Coca-Cola’s environmental impacts would come across the variety of statements relied upon by Earth Island through some casual Googling.”

The First Amendment didn’t bar the suit. Earth Island challenged Coca-Cola’s commercial speech about its goods and services, although relief would have to preserve its First Amendment rights.