This is follow-on consumer class litigation over Clorox’s
Fresh Step cat litter marketing (previous
discussion of class action; previous
discussion of Lanham Act prequel).
The ads represented that Fresh Step was the only cat litter using
carbon, and that Fresh Step was better at eliminating odors than baking soda
brands. Plaintiffs alleged that Church
& Dwight’s studies showed the literal falsity of these claims, and that
they therefore paid a premium they otherwise wouldn’t have paid: a 25-pound box
of Clorox’s Fresh Step costs $10.77, or $0.43 per pound, while a 25-pound box
of Clorox’s Scoop Away cat litter brand (which does not contain carbon) costs
$9.37, or $0.37 per pound, while a 20-pound box of C&D’s baking-soda-based
Super Scoop costs $7.88, or $0.39 per pound.
This opinion involved a new round of Clorox moving for
judgment on the pleadings. It first contested plaintiffs’ Article III standing,
arguing that plaintiffs failed to plead that Fresh Step didn’t work as
advertised in reducing odors or that they personally found Fresh Step less
effective; their injuries were only hypothetical since they didn’t allege that
they compared Fresh Step to other brands.
Clorox argued that they couldn’t show injury if they never experienced
Fresh Step’s inferiority, and that the presence of better cat litters on the
market was irrelevant to harm.
The court agreed with plaintiffs: they pled an actual and
concrete economic injury by alleging that they were deceived into paying a
premium for a less effective cat litter.
Even if Fresh Step did eliminate cat odors, it didn’t perform as
advertised if it was worse than other competing products. Plus, if it’s
objectively inferior, it’s irrelevant that plaintiffs didn’t figure that out
first hand. The court was not going to
assume that there was no objective way to measure or compare cat litter
effectiveness.
Clorox essentially argued that taste in cat litter is a
matter of personal preference, like preferring Pepsi to Coke. Maybe so, but the
complaint properly pleaded that baking-soda-based litters were objectively
better at reducing cat odors. That one
type of cat litter might be objectively superior wasn’t implausible. Indeed,
that was Clorox’s very own claim in its ads.
(In a footnote, the court rejected Clorox’s analogy to a Pepsi taste
test superiority claim; Clorox argued that a consumer who relied on such a
claim, enjoyed the Pepsi he bought, never bought Coke, and never personally
found Coke preferable, wouldn’t have standing to sue. But the taste of a soft drink can’t
objectively be measured. A better
hypothetical would be Pepsi’s claim that its product had fewer calories than
Coke. This could be falsified and, if false, could harm calorie-conscious
consumers, who need not try Coke to prove injury.)
The cases Clorox cited didn’t allege injury from paying a
premium based on a misrepresentation about superiority. However, Clorox’s arguments did raise
questions about certification. If
measuring odor fighting is subjective, then commonality/representativeness
would be hard to show. (I myself would
be tempted to hold Clorox to its measurability claims, like the house that was haunted
as a matter of law.)
New Jersey claims: the New Jersey Consumer Fraud Act
requires (1) unlawful conduct by the defendant; (2) an ascertainable loss on
the part of the plaintiff; and (3) a causal relationship between the
defendant’s unlawful conduct and the plaintiff’s ascertainable loss. Clorox repackaged its standing arguments to
contend that plaintiffs didn’t plead ascertainable loss; nope. NJ accepts the “benefit
of the bargain” theory, where the difference in value between the product promised
and the one received can be reasonably quantified.
However, the breach of express warranty claim failed because
the NJ plaintiff failed to provide the required notice within a reasonable time
after discovering the breach; failure to provide such notice before suit bars
the claim forever. The fact that Clorox
knew of C&D’s earlier Lanham Act lawsuits was irrelevant; the statute
specifically contemplated notice by the buyer.
In NJ, unjust enrichment requires a plaintiff to show that
it expected remuneration when it conferred a benefit on the defendant and that
the retention of that benefit without payment would be unjust. Some cases hold that enrichment claims should
be dismissed when based on tortious conduct without allegations that the
plaintiff anticipated remuneration (isn’t the allegation here that the
plaintiff expected to get more than she did in return for her money?); others
allow unjust enrichment claims based on false advertising to proceed. The court
went with the former and dismissed the claim with prejudice.
New York: Clorox’s standing/injury arguments didn’t get rid
of the GBL claims either. Clorox argued
that pecuniary harm wasn’t enough, but even the cases it cited recognized that a
consumer might have a cognizable GBL claim where the consumer pays a higher
price for a product as a result of a defendant’s misrepresentations. Clorox argued that plaintiffs needed to plead
more particularized facts about the alleged price premium, since Fresh Step is a
very popular brand and thus would command a price premium anyway. The court
disagreed. “It is plausible that Clorox
can charge more for Fresh Step because Clorox represents that Fresh Step is
better at eliminating odors than other brands. It is also plausible that Fresh
Step became one of the most popular brands of cat litter through the success of
Clorox’s advertising.”
However, the complaint failed to allege that the NY
plaintiff was deceived in NY, as required.
Alleging that she was a NY resident was insufficient; the deception must
occur in NY. The plaintiff was granted leave to replead.
Express warranty claims survived: whether Clorox made an
affirmation of fact or promise that was false when made was a question of fact,
even though Clorox argued that it believed (and still does) that Fresh Step was
more effective than other brands. (This
seems to interpret “false” to mean “knowingly false,” and I’m not sure that’s
what it should mean in a warranty context.)
The rejected standing arguments also failed to show that there was no
breach, even though the NY plaintiff didn’t allege that she personally deemed
Fresh Step ineffective.
In NY, unjust enrichment isn’t a catchall cause of action, but
applies only unusually, when, “though the defendant has not breached a contract
nor committed a recognized tort, circumstances create an equitable obligation
running from the defendant to the plaintiff.” An unjust enrichment claim is not available
where it simply duplicates a conventional contract or tort claim, as here. If the GBL/warranty claims succeeded, the
claim would be duplicative, and if it failed, her unjust enrichment claim would
have to fail because it was predicated on the same theory of deception.
Florida: the Florida Deceptive and Unfair Trade Practices
Act claims didn’t fall to Clorox’s rehashed standing/harm arguments. In Florida, the measure of damages is the
difference in market value of the product as delivered and the market value as
it should have been. However, the same
problem as with the NY claims required repleading to allege a connection with
Florida; the Florida plaintiffs didn’t allege where they saw Clorox’s ads or
bought Fresh Step.
The Florida Advertising Act declares that the dissemination
of “any misleading advertisement” is “fraudulent and unlawful.” Clorox argues
that plaintiffs were required to satisfy Rule 9(b) as interpreted by the 11th
Circuit; the court already rejected a similar argument on an earlier motion to
dismiss and declined to revisit the issue.
Also, the case wasn’t in the Eleventh Circuit; the court here was bound
to follow Florida law, not the law of another circuit.
On breach of express warranty, the court noted uncertainty
about whether privity was required, as it is with breach of implied
warranty. Some courts don’t require
privity where the retailer or “middleman” is unlikely to have relevant
knowledge regarding the manufacturer’s product. The court found those cases
persuasive and applicable, given that it was unlikely that cat litter retailers
had relevant knowledge about the comparative effectiveness of cat litter. Thus the express warranty claim survived,
though the unjust enrichment claim was dismissed as duplicative.
Texas: the Texas Deceptive Trade Practices Act allows suit
over three types of conduct: (1) false, misleading, or deceptive acts or
practices; (2) breaches of express or implied warranty; and (3) any
unconscionable action. For the first two
prongs, Clorox argued that plaintiffs failed to satisfy Rule 9(b), but the
court disagreed. As for (3), unconscionability
relates to “an act or practice which, to a consumer’s detriment, takes
advantage of the lack of knowledge, ability, experience, or capacity of the
consumer to a grossly unfair degree.” “A slight disparity between the
consideration paid and the value received is not unconscionable, a glaring and
flagrant disparity is.” The court didn’t find Clorox’s alleged conduct “grossly
unfair,” since plaintiffs conceded that Fresh Step did reduce cat odor. “[F]or the purposes of Texas law, it is not
unconscionable to charge a premium of a few cents per pound for an effective
cat litter.”
The breach of express warranty claim also was kicked out for
failure to provide notice within a reasonable time. A demand letter to Clorox’s counsel a year
after litigation began was too late, since plaintiffs allegedly learned of the defects
through Church & Dwight’s lawsuits, filed in early 2011. Nor was there an independent cause of action
for unjust enrichment; it was just a theory of recovery.
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