Williams v. Reckitt
Benckiser LLC, No. 20-23564-CIV-COOKE/GOODMAN, 2021 WL 8129371 (S.D. Fla. Dec.
15, 2021) (R&R)
This long and
citation-heavy opinion would be a good cheat sheet for looking at class action
settlement approvals generally, especially in the 11th Circuit.
Courts often are
skeptical about small differences in wording when plaintiffs challenge them as
causing deception. But when it comes to surveys or, here, approving
settlements, matters can differ.
The court begins
with an extended discussion of how small words can mean big things; “[a]t
times, the mere addition or modification of only one or two words can cause a
dramatically different result.” This is important because the proposed
settlement of this class action against manufacturers/distributors of Neuriva
brain-health-promotion products requires only small changes in marketing
claims. This is despite the fact that the underlying complaint alleges that the
products do not provide any actual tangible benefits. “They say consumers are
being defrauded because the products do not improve memory, focus,
concentration, and other components.” The settlement lets defendants “continue
selling the same supposedly useless and expensive products (but without certain
marketing and sales representations about the products’ efficacy).” Defendants,
on their part, “argue that the products do in fact work and that their
ingredients have been successfully demonstrated to provide benefits for
promoting brain health.”
The injunctive
relief does what this xkcd cartoon mocks:
Instead of marketing
and labeling Neuriva products as providing results which are scientifically and
clinically “proven” or which “show” benefits after being “tested,” defendants have
to revise all label/marketing references for two years from “clinically proven”
to “clinically tested.” For two years, they must refrain from making any
reference relating to brain health function using “clinically shown” or similar
language, such as “clinical studies have shown” or “clinically tested and shown”
or, the magistrate emphasized, “confirmed,” “demonstrated,” “established,” or
other words or phrases synonymous to “shown.” In addition, they would have to
limit the use of authorized language about the studies or testing to refer to
only Neuriva’s ingredients, not to Neuriva as a whole. “The parties have
convinced me that these language limits and changes are significant.”
Given the risks of
litigation—including the nontrivial risk of losing at trial, as similar claims
had done elsewhere (with the competing product Prevagen, for example, the jury
was hung and the court decertified the class)—the magistrate recommended
finding that settlement was fair, despite some objections, including from Truth
in Advertising, Inc. (TINA). The settlement included a fund of up to $8
million; unclaimed money would be returned to defendants. The magistrate also
recommended approving the requested amount of attorney’s fees, costs, and
expenses of $2.9 million. (Whether named plaintiff incentive awards were
allowed in the 11th Circuit remained nonfinal pending a potential rehearing in
another case, so the magistrate recommended retaining jurisdiction to entertain
a motion for same if the law changed.)
The proposed
injunctive relief would permit defendants to revise or modify their
representations if they possess “competent and reliable scientific evidence
substantiating that a representation is true” by providing plaintiffs’ counsel
with 180 days’ written notice of the proposed representations and the
underlying scientific evidence. The court would have continuing jurisdiction to
rule on any challenge.
The magistrate
initially ordered plaintiffs to explain why their proposed settlement was ok if
their allegations were that the product was useless; in partial response, they
emphasized that they weren’t alleging that the Neuriva products are in fact
harmful if ingested or are being unlawfully sold, and noted that it was unlikely
they could even seek a prohibition on their sale. They also pointed out that
winning—if they did—could take many years. (If the relief is for only two
years, then why does it matter if relief is pushed out to the future?)
Among other things,
TINA’s objection argued that “clinically tested” in advertising implies that
the product has been clinically “proven”; that the labeling restrictions are
binding for only two years, while class members “would be permanently
prohibited from suing.” An email from Rich Cleland of the FTC, made part of the
record by TINA, pointed out that
A significant number of consumers would not see any difference between
the statements “clinically or scientifically proven” and the statement
“clinically or scientifically tested.” Both statements, one express and the
other implied, convey that there is substantial scientific evidence supporting
the underlying claim. With regards to the tested claim, whatever reason would
there be for the advertiser to claim that a product has been “clinically or
scientifically tested” if those tests did not support the underlying claim?”
Defendants argued
that there is a significant distinction between proven and tested but also
contends that both claims are true here. “Defendants explain that market research
specifically directed at brain health supplements confirms the difference in
interpretation and attached a supporting declaration from a Dartmouth professor,”
and also relied on dictionary definitions.
As of October 14,
2021, the Settlement Administrator had received a total of 50,634 claims. Class
members with proof of purchase may submit a claim for two purchased products
for a maximum benefit of $65.00, while class members without proof of purchase
may file a claim for up to four purchased products for a maximum benefit of
$20.00 The requested claims total a bit over $935,000.
“The settlement here
is a prime example of why class action settlements are highly favored in the
law. Absent the settlement, the class action could have faced serious hurdles
to recovery, and now the class is entitled to significant settlement benefits
that may not have even been achieved at trial.”
The settlement, by
the evidence, was negotiated at arm’s length and after significant
investigation by plaintiffs’ counsel, including consultations with experts.
Litigating these complicated claims “would have undoubtedly proven difficult
and consumed significant time, money, and judicial resources.” Any victory
would have taken years and was far from guaranteed. The settlement had monetary
relief that was significant to the individual consumers who submitted claims—people
without proof of purchase got 15 or 22% of their money back, depending on the
product. And having a claims-made fund was acceptable even if plaintiff got to
take the remaining money back. There was also injunctive relief requiring “significant
label changes -- specifically removing the language at the heart of this case
-- within six months after final approval (as opposed to years down the road).”
TINA objected that
the temporary removal of “proven” and similar words was unhelpful to consumers given
defendants’ ability to use “clinically tested.” But the magistrate found that
the falsity theory was pretty risky—as private litigants, they couldn’t require
defendants to substantiate their claims, and they might risk preemption if they
tried. (The magistrate seems to be conflating the idea that private plaintiffs
can’t require substantiation, which is correct, with the mistaken idea that they
can’t win if they merely prove that “clinical studies don’t prove the
product works.” The latter is classic falsity: by proving that the studies don’t
prove the claim, the plaintiffs would have falsified the thing that defendants
actually said, not put the burden on defendants to substantiate the thing they
said. In fairness, there are other cases that don’t understand this
distinction.) And there were other proof barriers to victory.
In my mind, the real
objections are to the substance: is there really a difference between
“clinically proven”/“shown” and “clinically tested” to ordinary consumers? And an
injunction that lasts only two years is silly. “Plaintiffs concede that they
would prefer longer than two years for the injunctive relief, but they explain
that the only alternative is continued litigation, which can last for several
years.” But why should we prefer these two years to future deception-free
years, maybe far longer than two, which we should get if the products are in
fact junk?
Defendants’ expert concluded that consistently using “Clinically Tested” will result in “consumers [who] are likely to correctly conclude that Neuriva’s ingredients have been tested, without necessarily drawing additional inferences about the level of proof or certainty those tests revealed.” This conclusion was based on her review of the record, the demographics of defendants’ customers, defendant RB’s own marketing research, and related academic research. In her view, the words used would combine with the age/income/education of the target consumer and the context of preventative health to establish that consumers would perceive a meaningful difference between a “clinically shown” versus a “clinically tested” claim. Unpersuasively, she analyzed the dictionary definitions, which have very little to do with the context of marketing a product—she would have been better off with Gricean implicature. But “tested” is, in dictionary terms, about the process, while “proof/prove” is about the outcome. [Is expert testimony about the dictionary really admissible? I guess it doesn’t matter here, but it sure seems to me that the court could just as easily read the dictionary as the expert.]
[On review of the expert declaration, it seems like a lot of chaff, though I guess it worked! The strongest evidence--the only direct evidence--was a study of defendants' that found that 33% of respondents thought that "clinically proven" meant that the product was extremely likely to do what it said, while only 26% thought that "clinically tested" meant "extremely likely" to work. I will note that 26% is a pretty high deception percentage on its own, assuming the product is not extremely likely to work. The expert emphasized that this was less than the 28% average from all claims tested that resulted in "extremely likely" ratings. But this whole thing is extremely misleading if not outright false. To begin with, unless the expert was looking at something other than the cited report, the percentage of respondents who said "clinically tested" meant "extremely likely to work" was 28%, not 26%. The 26% number is for "clinically researched." The average "extremely likely" rating of claims tested was 24%; the research found that 28% was significantly higher than average and so was 26%. Separately, the "less than the 28% average" seems to be a made-up statistic--the expert seems to have taken the average of the claims that were significantly more convincing than average, so why the fact that "clinically tested" was midrange in that subset matters is obscure to me. Also, as noted at the bottom of this post, the tested claims were mostly puffery/gobbledegook, and many had little to do with efficacy, driving down the overall "average" further. But the statistical tomfoolery seems to me less significant than the outright error.]
Doing a bit better,
the expert “explained that older consumers, such as those 55 years and older,
are typically more familiar with pitches in health advertising,” and noted that
more than half of Neuriva’s sales are from this group of consumers. So too with
higher-income consumers, who can pay from $30 to $80 per package, who are
typically “more educated and more health literate than lower income and
less-educated consumers.”
[Implicit in this
analysis is that it’s ok for consumers to be induced to bet on the chance that
the product works. I think that’s a reasonable position to take, but I wish it
would be more clearly articulated. Right now the reasoning is all implicit:
Consumers will supposedly understand that the product ingredients have been
tested, which they are supposed to infer increases the chance it will work (otherwise
why would the advertiser say so? In the abstract, the fact that something has
been tested says nothing about the prior probability that it works) but understand
that it’s just a chance, and if they want to pay their money for a chance we
should let them. Perhaps ironically, the message of “clinically tested” in the
pro-settlement story is therefore not at all the dictionary meaning of “tested”—it
is “there’s some chance this works, but it’s not proven.” So why are we looking
at the dictionary again?]
So, the injunctive
relief changing the label provided benefits to the settling class [for two
years]. This required labeling “that does not suggest some definitive
scientific outcome or consensus” [for two years]. And no case holds that “clinically
proven” has the same meaning to consumers as “clinically tested.” Indeed, one
NAD case suggests that those terms are ok. Living Essentials, Chaser, NAD Case
No. 4365 (July 8, 2005) (accepting change from “clinically proven” claim to
“clinically tested” and from ‘Chaser has been tested and proven effective ...’
to ‘Chaser has been tested and shown effective ....’”). Also, because other brain
supplements use “shown,” the settlement will put the Neuriva products at a
disadvantage with its competitors, showing that the settlement provided real
value.
In sum, the monetary
and injunctive relief together amounted to a fair and reasonable settlement.
The requested attorneys’
fees were also fine; the parties engaged in arms-length negotiation for
defendants’ agreement not to oppose a fee request up to a certain amount (clear
sailing) and for unclaimed amounts of the claims fund to go back to defendants
(a kicker). The court found no need to use a lodestar/hours worked approach,
but if it did do that, the fees requested would be a reasonable multiple (x2.5)
of fees for the hours worked. “The $2.9 million sought by Class Counsel for
fees and expenses constitutes 36% of the value of just the monetary relief made
available to the Settlement Class, which is well within the range approved by
the Eleventh Circuit,” even ignoring the value of the injunctive relief. [Though
it is almost three times the amount that seems likely to be paid out, not 36%;
given sophisticated parties’ ability to predict these things, did defendants
ever expect to pay $8 million?] And there was no risk that fees would deplete
the separate settlement fund.
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