Tuesday, February 13, 2018

Settlements allowing competitors to use term doesn't insulate Clorox from its own possible deception

Gregorio v. Clorox Co., 2018 WL 732673, No. 17-cv-03824 (N.D. Cal. Feb. 6, 2018)

Gregorio alleged that, to capitalize on consumer demand for “natural” home cleaning products, Clorox falsely advertised its “Green Works” cleaning products as “natural” or “naturally derived.” The “naturally derived” representation appears above the cleaning product type:

The back label of each green works products has an ingredients list, and refers consumers to two websites. The greeworkscleaners.com website concedes that the green works products are not entirely naturally derived: “[T]he products are “95% to 99% naturally derived … such as filtered water, plant-based cleaning agents, essential oils, corn-based ethanol and wood-based fibers. The other ‘1% to 5%’ are a combination of preservatives, fragrances and dyes.”  The ingredientsinside.com website lists each particular products’ ingredients, but doesn’t indicate whether the ingredient is natural or non-natural.

Plaintiffs alleged that the products fail to meet reasonable consumers’ expectation and definition of all-natural products, and they brought the usual California claims, as well as New York claims and Magnuson-Moss Warranty Act claims (the last of which was dismissed for failure to allege key facts about the value of the transactions).

Clorox argued that reasonable consumers wouldn’t have been misled by “naturally derived.”  It pointed to various disclosures, and to three class action settlements involving competitors’ products that used the terms “100% natural” or “all natural.”  In the settlements, competitors agreed to stop using the terms “100% natural” and “all natural” and instead use the terms “naturally derived” or “natural,” as well as to provide additional ingredient information on their websites. Clorox already does these things. Clorox argued that these court-approved settlements showed that a reasonable consumer would not be misled, “particularly given that one of those cases was pursued and settled by the same lawyers pursuing this case.”

True, the companies party to the settlements “now have strong defenses against any future class action challenging their use of ‘naturally derived,’” which Clorox doesn’t have, and if the plaintiffs here win, . “Clorox may no longer be allowed to use the exact same phrase as its competitors can use with theoretical impunity.”  That’s unfair, but there’s no authority showing that potential unfairness overrides the reasonable consumer test.  “Further, private settlements cannot and do not serve as a substitute for the court’s own determination regarding whether it is plausible that Clorox’s labeling would deceive a reasonable consumer. In fact, those settlements—involving different parties, litigating over different products, displaying different allegedly deceptive terms—barely amount to persuasive authority that a reasonable consumer would not be misled by the labeling at issue here.”  Plus, “by their very nature settlements are a product of compromise that involve numerous variables.”  Too bad for Clorox.

Further, the complaint plausibly alleged misleadingness. “It is not unreasonable as a matter of law to expect a product labeled ‘naturally derived’ to contain no synthetic ingredients. It is also far from unreasonable to expect the same product to contain only ‘naturally derived’ ingredients—a representation apparently contradicted by defendant’s own website.” Though “100% natural” and “all natural” would also be misleading, “the court is not free to dismiss claims because defendant chose not to use a potentially more misleading phrase.”  The ingredient list didn’t shield Clorox from liability, because reasonable consumers expect it to include more detailed information, not to contradict other representations on the packaging. A jury would have to decide.

Nor would the court stay the case under Clorox’s hail-Mary attempt to invoke the primary jurisdiction doctrine, based on the FDA’s rulemaking regarding “natural” foods that began in November 2015. The FDA doesn’t regulate the cleaning products at issue here.

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