Podobedov v. Living Essentials, LLC, 2012 WL 2513489 (C.D. Cal.)
Plaintiffs, citizens of NY and California, sued on behalf of
a class of buyers of 5-hour Energy energy shots—7 million sold per week, with a
marketing budget of $90 million per year.
Living Essentials touts 5-hour Energy as effective in increasing energy,
alertness, and focus; ads attribute this to the B-vitamins, amino acids, and
enzymes present in the drink: “5-hour ENERGY®'s blend of vitamins and amino
acids gives you hours of smooth energy;” “5-hour ENERGY® doesn't jack you up
with sugar, caffeine and herbal stimulants. Instead, it's packed with stuff
that's good for you—B-vitamins, amino acids and enzymes.” Plaintiffs alleged
that these claims were misleading and false, because the only ingredient that
has any effect is the concentrated dose of caffeine in the drink. Plaintiffs further alleged that the name
itself was misleading, since the drink doesn’t provide 5 hours of energy
according to the best scientific evidence.
Further, plaintiffs alleged that evidence of deceptive intent came from
defendants’ previous experience misleadingly marketing a line of products under
the Chaser name, including “creating phony clinical studies, making false
representations in the product name, and attributing the effects of the primary
ingredient to lesser ineffective ingredients.” They also alleged that an individual
defendant, Bhargava, controlled the defendant companies and extracted all the
profits, quoting him as saying that he wanted “to distribute as much cash out
of the Company as possible to keep it judgment proof.”
California claims (including breach of warranty): Defendants
argued that plaintiffs didn’t identify misrepresentations likely to deceive a
reasonable consumer or plead reliance.
The court disagreed. Among other
things, the complaint alleged that specific statements were false and
misleading, including the ones above and “A powerful blend of B Vitamins for
energy,” and “5–hour ENERGY® drinks provides [sic] a boost of energy and mental
alertness that last for hours-with no crash. That's because 5–hour ENERGY is
packed with B–Vitamins, enzymes and amino acids. It contains zero sugar, zero
net carbs, and just enough caffeine to get the ball rolling.” These statements could reasonably be taken to
suggest that the energy boost comes from non-caffeine ingredients (all but the
last could even suggest that the drink didn’t contain caffeine), and were
actionable. Likewise, the complaint pled
that plaintiffs relied on these misrepresentations. The same reasoning preserved the NY claims.
The Magnuson-Moss Warranty Act claim was dismissed since the
act applies “only to warranties which pertain to consumer products actually costing
the consumer more than $5,” and the complaint pled that the drink sold for
about $2.99 per shot. Plaintiffs could
replead with allegations, for which they had evidence, that the product was
sold in multipacks costing more than $5.
The court also denied the motion to strike the allegations
about Chaser.
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