Friday, December 30, 2022

It's not deceptive for the NY Jets and Giants to play in New Jersey

Suero v. NFL, 2022 WL 17985657, 22-CV-31 (AKH) (BCM) (S.D.N.Y. Dec. 16, 2022) (R&R)

Plaintiffs alleged ten falsehoods related to the New York Jets/Giants and their home stadium in New Jersey, where the Giants and the Jets have played for decades.

Plaintiffs demand that the Jets and the Giants remove all references to New York from their names, logos, and advertising, and pay damages to those they deceived. Additionally, plaintiffs demand that MetLife Stadium stop using a logo incorporating the New York City skyline and stop promoting itself as the “number one stadium in the world,” because, they say, it is inferior to many “state-of-the-art NFL venues elsewhere,” particularly those with domes or retractable roofs.

One plaintiff alleged that she was unaware that the Giants have played in New Jersey since 1976, and the Jets since 1984. Both plaintiffs alleged that they purchased tickets and attended at least one NFL game at MetLife Stadium in 2021, which they would not have done but for defendants’ false advertising. This allegedly caused them to incur significant travel costs and inconvenience.

Plaintiffs argued that, while other teams play outside of the “cities for which they are named,” the Jets and the Giants are “the only teams to play in an entirely different state,” and that this was similar to other state-origin cases.  (Footnote: The Washington Commanders play in Maryland, but plaintiffs said that didn’t matter because “D.C. is not a state, and Maryland and Virginia are both stand-in states for our nation’s capital.” “The Court [correctly] suspects that the residents of the District of Columbia, Maryland, and Virginia would disagree with that characterization.” Taxation without representation!)

Plaintiffs failed to allege complete diversity. They also failed under CAFA, even as to the makeup of the putative class, which would have to comprise “persons who, as a result of defendant’s alleged deceptions, personally attended one or more NFL games at MetLife Stadium since 2016, thereby incurring the cost of tickets, concessions, and transportation costs ‘to and from the MetLife Stadium from New York City.’ Common sense suggests that both classes (if certifiable) would prove to be small in size and composed largely of New Yorkers.” Without a price premium theory, the class is only those who were deceived into the journey, and excludes “those who willingly (or even grudgingly) made the trip with full knowledge that they were going to New Jersey.” Likewise, it was difficult to imagine that large numbers of non-New Yorkers were deceived into going to NYC in order to attend games.

But the judge also recommended dismissal on substantive grounds. First, plaintiffs failed to allege wrongdoing by the NFL.

Second, they didn’t plausibly allege deceptive conduct under the GBL. It is “well settled that a court may determine as a matter of law that an allegedly deceptive advertisement would not have misled a reasonable consumer.” In context, the retention of the geographic signifier “New York” by the Jets and the Giants, together with the use of a “New York City skyline logo” by MetLife was not plausibly deceptive. “It is common for a professional sports team to name itself after the city it calls its home while playing in the suburbs of that city (or, in some cases, even further away).” [Sports history omitted.] “[N]o reasonable football fan, ‘acting reasonably under the circumstances,’ would conclude from the names and logos of the Jets and the Giants that their stadium is within the five boroughs of New York City.” The MetLife Stadium website informed viewers that there was a “NJ Transit rail station” located in front of the stadium, and included what appeared to be a clickable map link showing the stadium just off the New Jersey Turnpike. “A reasonable consumer (even if she did not click through to Google Maps) would understand that New Jersey Transit goes to New Jersey, and that the New Jersey Turnpike is in New Jersey.”

Statements about stadium quality, e.g., that MetLife Stadium is “the number one stadium in the world,” and that it “sets the standard for venue excellence” were classic puffery. Statements that MetLife Stadium is “under 20 minutes from New York City” and “accessible to Penn Station” were not puffery, but also not plausibly false. The website did not promise a commute of “under 20 minutes”; it estimated travel time of “approximately 20 minutes” from Penn Station. Plaintiffs themselves alleged that they made that trip in 30 minutes on a game day (after first spending 30 minutes looking for the right platform at Penn Station). “Neither the extra ten minutes nor the need to change trains in Secaucus would mean, to a reasonable consumer, that the stadium is not ‘accessible’ from Penn Station, and neither, in any event, is ‘materially misleading,’ particularly given that route information, including actual travel time, is ‘publicly available’ from New Jersey Transit.” [This is an example of how borderline claims lead courts to tell consumers to consult external information, even though in general courts don’t require consumers to double-check information from an advertiser if it would be reasonable to believe them; caveat emptor is not the general rule.]

Separatenly, plaintiffs didn’t allege that they ever saw the MetLife Stadium website, much less that they were exposed to or relied on those statements, independently justifying dismissal.

Similar problems doomed the fraudulent misrepresentation claim. Indeed, you can see the old fraud reasoning both in the above and in what the judge says about the fraud claim:

Thirty seconds on the internet (or a glance at a map) would tell any consumer where the Jets and Giants play, the state in which MetLife Stadium is located, and how far it is from midtown Manhattan. Another thirty seconds, or a glance at a train schedule, would reveal how long it takes to get there from Penn Station. Whether or not plaintiffs did any of these things, they clearly “had the means of ascertaining the validity of the representations,” which is fatal to their fraud claims.

Thursday, December 29, 2022

possibly misleading things are afoot at the Circle K: discount class certified

Petterson v. Circle K Stores, Inc., 2022 WL 17974463, No. 3:21-cv-00237-RBM-BGS (S.D. Cal. Nov. 23, 2022)

The court certifies a consumer class action for monetary relief with some observations about the kind of evidence required for certification. Petterson bought a lot of cigarettes at Circle K, expecting discounts from their discount program, but they didn’t give him a discount on cartons when he expected a discount based on buying multiple packs at once (their position was apparently that the discount applied to multiple loose packs, but not full cartons of 10 packs). Although the discounts varied, they regularly offered a discount for buying two packs at once.

“The central issue in this case is whether Circle K’s discount advertisements misled customers into believing that the multi-pack discount applied to purchases of cartons.” Petterson brought claims under California’s UCL and FAL and moved to certify a class of “All persons in California who purchased a carton of cigarettes from a Circle K store in California and did not receive an advertised multi-pack discount from December 4, 2016 to the present.”

Two representative ads:

I’m going to skip the easy parts (e.g., numerosity). Variations in which ads class members saw/what Petterson remembered/that he occasionally got a clerk to give him the discount by opening up a carton did not defeat typicality. “Minor variations in the fact patterns underlying class members’ claims do not defeat typicality where the plaintiff has otherwise shown that he has suffered the same or similar injury as those he seeks to represent.”

Because the claim was based on the objective reasonable consumer standard, both commonality and predominance were present. Variations in the ads/discount programs were not big enough to defeat them, even though some ads were sent only to customers who joined Circle K’s Tobacco Club program and others weren’t. Likewise, it didn’t matter that ads displayed discounts in different ways, for example: (i) a specific discount amount on the cigarettes purchased; (ii) a generalized offer of savings while purchasing multiple items (“Buy 2 packs and save”); and (iii) a specific per-pack price that a customer would expect to pay. They also had different durations, different funding sources (manufacturer discounts vs. Circle K discounts), and were occasionally combined to determine the final customer price. But these variations were not material to “the central issue of whether purchasers of cartons received the multi-pack discount that was advertised. Circle K has produced numerous advertisements that show commonality among Circle K’s discount programs: multi-pack purchases receive discounted prices.”

Reliance: The named plaintiff has to show reliance at the certification stage. Petterson did, even though he didn’t recall seeing certain advertisements at issue. A plaintiff does not “need to demonstrate individualized reliance on specific misrepresentations to satisfy the reliance requirement.” “[W]here, as here, a plaintiff alleges exposure to a long-term advertising campaign, the plaintiff is not required to plead with an unrealistic degree of specificity that the plaintiff relied on particular advertisements or statements.” Petterson testified to the general contents of the ads he saw and their locations, which sufficed under these circumstances.

Circle K argued that he would have bought cigarettes there regardless, because sometimes he did even without a discount. But he also testified that “before purchasing an undiscounted carton at Circle K, he would go to a nearby 7-Eleven to determine if that store offered a discount; if neither store offered a discount, he would purchase the undiscounted carton at Circle K.” This testimony established that he would change his behavior based on the presence of a discount, which was enough for materiality. “California case law is clear that reliance does not require that the allegedly misleading statement be the ‘sole or even the predominant or decisive factor influencing his conduct[,]’ rather the misrepresentation must have played a substantial part in influencing his decision.”

What about materiality, and thus reliance, for the class? “[A] presumption, or at least an inference, of reliance arises wherever there is a showing that a misrepresentation was material.” Because “[q]uestions of materiality and reliance are determined based upon the reasonable consumer standards, not the subjective understandings of individual plaintiffs,” this could be amenable to class treatment. The court agreed with Petterson that materiality “need not be proven at class certification; instead, Plaintiff needs to show only that a ‘common question of materiality and reliance’ exists.”

Circle K criticized plaintiff’s expert for failing to produce any data regarding how consumers interpret the advertisements at issue, conduct a consumer survey, or speak to Circle K customers about the ads. While some courts have found a plaintiff’s motion for class certification to be deficient where the plaintiff’s expert did not conduct a consumer survey, Amgen Inc. v. Connecticut Retirement Plans & Trust Funds, 568 U.S. 455 (2013), “ instructed that Rule 23(b)(3) requires a showing that ‘questions common to the class predominate, not that those questions will be answered, on the merits, in favor of the class.’” Further, Amgen noted that when materiality is judged on an objective standard, it is a common question for purposes of Rule 23(b)(3). That was the case here.

To generate common answers, plaintiffs can use consumer surveys, expert testimony, Circle K’s Rule 30(b)(6) testimony, and Circle K’s internal documents. Given that materiality is judged on an objective reasonable consumer standard, “the issue is susceptible to generalized, class-wide proof.”

Damages: Petterson argued that he could easily calculate the restitution damages he seeks by multiplying the number of cartons sold by the discount amount offered. This was sufficient at the class certification stage.


50 Cents of Endorsement: gossip blog plausibly D's agent for purposes of false endorsement, right of publicity

Jackson v. Kogan, 2022 WL 17582560, No. 22-22972-Civ-Scola (S.D. Fla. Dec. 12, 2022)

Jackson, aka 50 Cent, is a famous artist. Defendant MedSpa is run by defendant Kogan; it offers plastic surgery and minimally invasive procedures such as Botox treatments. In 2020, Jackson “happened to be in the proximity” of MedSpa’s location. “At Kogan’s request, Jackson posed for, and took, a picture with Kogan in front of a backdrop stamped with the words ‘PERFECTION MED SPA’ throughout.”

Jackson allegedly believed that Kogan “simply wanted a photograph with [him] exclusively for her own private enjoyment.” (Um, sure.) Nonetheless, MedSpa then uploaded the photo to one of its public Instagram accounts. The photo’s caption: “Thank you @50cent for stopping by the number one med spa @bh_perfection_medspa [ ] [ ] #50cent #bhperfectionmedspa #perfectionmedspa #medspa #celeb #vip #facial #laser.” Kogan posted a version of that same photo on to her public Instagram account with essentially the same hashtags. MedSpa repeatedly reposted the photo and shared it for articles published by a magazine and an online blog.  

In mid-2022, “a celebrity gossip media outlet known as The Shade Room (TSR)” published an article titled “Penis Enhancements Are More Popular Than Ever & BBLs Are Dying Out: Cosmetic Surgery CEO Angela Kogan Speaks On It.” The article was the result of the efforts of Kogan’s talent agent, who introduced Kogan to TSR representatives. On TSR’s Twitter, the link’s thumbnail image was composed of two side-by-side images: on the left was Kogan’s photo with Jackson, and on the right was a “close-up shot of a medical provider presumably performing a penile enhancement procedure on a patient whose face is not visible and whose genitals are obscured by an eggplant emoji.” Kogan also posted a screen capture video scrolling through the TSR article on her Instagram account.

The video shows a part of the article that quotes Kogan as saying, “At the moment we are seeing a major shift in men getting plastic surgery ... [m]en have really stepped up and are getting more surgery than we think.” Directly beneath that quote is Kogan’s photo with Jackson. “The article includes MedSpa’s phone number, statements entreating readers to call for a free consultation, and offers of promotional discounts on cosmetic surgeries and procedures.”

Kogan’s caption for the Instagram video included hashtags such as #plasticsurgery, #theshaderoom, #celebrity, and #penis. “Users responded to the video with crude commentary such as ‘@50cent Can I see the before and after pics?’, ‘Call him 50 inch [ ]’, and ‘Why they got 50 cent up there talking bout [ ] enlargement[.]’”

The complaint includes some interesting tidbits, including that other posts would include a "not our client" disclaimer (but maybe, based on the discussion, Jackson actually was their client, but not for penile enhancement)--see the images below.

replies implying he was a client, which the complaint doesn't directly controvert

"not our client" example of Instagram post (note that this wouldn't remove ROP liability unless the First Amendment protects against it, cf. In re Elster)

blog claiming 50 Cent as a client

"she paid him" comment with reply "I don't need to pay for advertisement"

Jackson brought claims for unauthorized misappropriation of his likeness under the Florida right of publicity statute; invasion of privacy; Lanham Act false endorsement and false advertising under the same statute; conversion; and unjust enrichment. All the claims survived.

Florida law prohibits the unauthorized publication of a person’s name or likeness for a commercial or advertising purpose without express written or oral consent. Defendants argued only that Jackson consented to the photo being used on Instagram without mentioning “the screen capture video and the promotional value it doubtlessly served.” Anyway, consent was a factual issue.

Invasion of privacy: Jackson’s allegations supported misappropriation and false light theories.

Lanham Act false endorsement: Yep. Jackson’s allegations—particularly those concerning the video—sufficiently alleged false endorsement, including by alleging a comment on one of defendants’ posts “in which an Instagram user deduces that Jackson was the Defendants’ paid promoter. Even more clear are the crude comments connecting Jackson to Defendants’ penile enhancement services, which followed the Defendants’ video publication. Again, Instagram users publicly responded with comments like ‘@50cent Can I see the before and after pics?’, ‘Call him 50 inch [ ]’, and ‘Why they got 50 cent up there talking bout [ ] enlargement[.]’”

No mention of Jackson’s name or explicit link was required. “ [A] picture is worth a thousand words. This one in particular depicts a worldwide celebrity next to Kogan with MedSpa’s name repeated all throughout the background. The promotional value is evident.” [Which, again, is why it defies belief that Jackson didn’t consent to something public, though I agree that his implicit consent shouldn’t extend to the penile enhancement stuff.] This wasn’t an incidental use; the photo’s importance derives from his presence in it and the caption directly promoted defendants’ business: “Thank you @50cent for stopping by the number one med spa @bh_perfection_medspa [ ] [ ] #50cent #bhperfectionmedspa #perfectionmedspa #medspa #celeb #vip #facial #laser.”

There was plausibly a specific implied endorsement of defendants’ plastic surgery services or penile enhancement surgery, given the video and the TSR article itself, “insofar as Kogan or her agent procured its publication.” Both of them surrounded the photo of Jackson with images and text that promote penile enhancement surgery and the defendants’ business. “An implied endorsement is, at minimum, reasonably deducible.”

False advertising: Same.

Conversion: The Eleventh Circuit has recognized conversion claims in the context of intangible property rights.  Jackson alleged he would have never consented to the photo had he known it would be used promotionally, and that was enough. [But what makes that conversion? How did defendants deprive him of property to which he was entitled? He still owns his right of publicity!]

Unjust enrichment also survived because of his alleged lack of consent plus the “surely great” promotional value defendants received from repeatedly sharing the photo; even if he received “free medspa services” in return, that wasn’t enough to show that they weren’t unjustly enriched.

Wednesday, December 28, 2022

Disclosing auto-renewal may require lots of explicitness, Streamlabs discovers

Leventhal v. Streamlabs LLC, No. 22-cv-01330-LB, 2022 WL 17905111 (N.D. Cal. Dec. 23, 2022)

Leventhal, on behalf of a nationwide class, alleged that Streamlabs LLC deceives consumers into signing up for a subscription product that carries an automatic monthly fee of $5.99. Streamlabs allows streamers collect donations from viewers through third-party payment processors (such as PayPal). Streamlabs Pro allows donors to add GIFs or other effects (such as hearts, stars, or confetti) to the messages that accompany the viewers’ donations. “The plaintiff in this case added a GIF to a donation and contends that Streamlabs’ subsequent disclosure to her — that adding a GIF or effect required joining Streamlabs Pro for $5.99 per month — was deceptive because it suggested that it was a one-time fee and did not disclose that the $5.99 monthly fee would renew automatically, in violation of California’s Consumer Legal Remedies Act (CLRA) and Unfair Competition Law (UCL).” The court found that she’d stated a plausible claim.

California’s Automatic Renewal Law (ARL) requires conspicuous disclosure of subscription terms and a consumer’s affirmative consent to automatic renewal, but Leventhal lives in New York. Nonetheless, the allegations, if true, plausibly plead that Streamlabs deceived consumers with its disclosures about the $5.99 fee.

At the time of her donation, the streamers’ donation page looked like this: 

essentially the same thing but in white

The page has a place to specify a donation amount, a place to send a message to the streamer, the message “Donate at least 1USD to use a GIF,” thumbnail pictures of GIFs and effects (with the word “Pro” next to them), and a green “donate” button to submit the donation. It says nothing about subscription fees.

The current donation page looks like this:

Instead of thumbnail pictures, it has a red box with “Extras Pro $5.99/mo” and slide buttons that allow a viewer to add a GIF or effect.

For both versions of the donation page, when a viewer clicks “Donate,” a “Donation Confirmation” page pops up:


In a red box, it shows a $5.99 charge for Streamlabs Pro. Underneath the red box, there is a notice: “You will be charged $5.99 per month by joining Streamlabs Pro …. Click here for more information.” The $5.99 charge and the notice have smaller and lighter font than the bolded font used for the donation amount. It does not say the charge will be renewed automatically each month until the viewer cancels the subscription. If viewers click “Click here for more information,” the resulting page “explains the benefits, monthly cost, [and] cancellation and refund policy of Streamlabs Pro subscription[s],” but it does not explicitly “disclose that Streamlabs will keep charging Streamlabs Pro subscribers $5.99 per month on their credit or debit cards until the subscribers cancel the plan.”

The plaintiff did not discover her recurring monthly charges for ten months, when PayPal emailed her about them. She “did not even have an account with Streamlabs at the time.” She created an account with the email linked to her PayPal account to try to cancel the subscription, but “she could not find a way to cancel the subscription.” Eventually, a Streamlabs representative responded that they would cancel her Streamlabs Pro account, refunded her $5.99 for the most recent subscription month, and refused to refund the rest. The representative also said that “to avoid being automatically signed up for Streamlabs Pro, she should ‘make sure to not toggle on Pro effects or GIFs’ when she donates.”

The complaint further alleged that, by “at the latest[ ] early 2019,” Streamlabs knew about consumer complaints from threads on Twitter, Reddit, and YouTube where customers complained about their unknowing enrollment in the subscription service and Streamlabs’ refusal to contact them about refunds and cancellation of the subscriptions. E.g., one person complained they were charged for two months for “unk[n]owingly [ ] being a Streamlabs Pro member. I didn’t even know it existed at all?! All I have been using Streamlabs for so far has been opening it up, and starting streams. Not even click[ing] anything that allowed me to be charged.” (The court discusses several other such statements as well.)

It is plausible that a reasonable consumer (including tech-savvy consumers) could be deceived by the process illustrated in the Statement and conclude that the $5.99 per month fee was a one-time fee. The disclosures did not say that the fee was an automatic monthly fee. There is evidence of actual consumer confusion, by the plaintiff and the consumer reviews. Similarly, for the standalone fraud claims, the allegations are sufficiently specific that Streamlabs’ process misled consumers that the $5.99 per month fee was a one-time donation, not an automatic monthly fee.

The complaint also plausibly pleaded UCL unfairness. Under the balancing test used in consumer cases, the court “must weigh the utility of the defendant’s conduct against the gravity of the harm to the alleged victim.” The complaint sufficiently alleged that the deception about the subscription outweighs its benefits, given that consumers “don’t believe they are enrolled in and, therefore, don’t use” the subscription. The court allowed her to plead the equitable UCL claim in the alternative to her money damages claim.

New Balance "Made in the USA" claims may overstate US content

Cristostomo v. New Balance Athletics, Inc., No. 1:21-cv-12095-AK, 2022 WL 17904394 (D. Mass. Dec. 23, 2022)

It’s not just the FTC interested in “Made in the USA” claims—here a court sustains a consumer protection complaint. “The plaintiffs purchased shoes from a premium New Balance 'Made in the USA' collection. New Balance admits the shoes in this collection are made of up to 30% foreign content but claims they adequately disclose this detail to consumers.”

Plaintiffs alleged that the line of shoes prominently feature “Made in the USA” claims despite the fact that the shoes’ foreign composition mean they do not meet the “all or virtually all” standard used by the FTC. Several of these shoes feature American flags, the unqualified phrase “Made in the USA” on the outside tongue of the shoes, and/or the word “USA”. Others were part of the “Footwear Made in the USA” collection on the New Balance website. The shoes in the collection also feature the prefix “Made in USA” before their respective names when they appear on the New Balance website. The inside label on the tongues of each shoe bear “Made in USA.” The top of the box features a silhouette of a USA flag with the word “made” written on top of it, and “made in the U.S. for over 75 years” is written on the side. The underside of the box features another small “made” logo next to a flag with a caption that places the “made” collection in the context of “over 75 years of authentic American craftsmanship.”

However, imported parts and foreign labor make up at least 30% of each shoe. New Balance admits that it imports the soles, which are key to the shoes’ functioning, especially for athletic shoes, and is a part of the shoe where the durability and quality matter a great deal.

While the front of the hangtags on its shoes features the “MADE.” logo with the US flag, the rear side of the hangtags says, “New Balance ‘made’ is a premium collection that contains a domestic value of 70% or greater.” Below another larger “made” logo, the same phrase appears on the side of each shoebox. A similar disclaimer about a domestic value of 70% or more appears below the link to the collection on the website, and the disclaimer reappears in some other places on the site. “Domestic value” has no legal definition.

Plaintiffs also alleged materiality/a price premium: “Products described as made in the USA imply to consumers a higher quality product, evoke a sense of patriotism, and provide support for domestic manufacturing jobs.” They alleged that the “made” collection was more expensive than similar shoes sold by New Balance that didn’t make the same claims.

New Balance argued that its qualifications were sufficiently clear and prominent. Plaintiffs disagreed and argued that New Balance regularly makes prominent and unqualified “Made in USA” claims and that several of the plaintiffs purchased the shoes on websites that did not feature the disclaimers.

Under the FTC’s guidelines, for a product to be considered “Made in USA,” it must be “all or virtually all” made in the USA: “all significant parts and processing that go into the product must be of U.S. origin” and the “product should contain no—or negligible—foreign content.” New Balance did not contest that its products didn’t meet that standard; instead, it argued that it was making a “Qualified U.S. Origin Claim” under FTC standards; the FTC does not consider these deceptive if the foreign composition is adequately disclosed. The FTC allows producers to specify the domestic amount, such as saying a product is made of “60% U.S. content,” or indicate generally the existence of foreign content (e.g., “Made in USA of U.S. and imported parts”). However, “because even qualified claims may imply more domestic content than exists, manufacturers or marketers must exercise care when making these claims.” Plaintiffs sufficiently alleged that New Balance inadequately disclosed the foreign content. Plaintiffs identified several examples in the complaint where a consumer would see the shoes presented as being “Made in the USA” without any qualification—including on the shoes themselves—with any disclaimer featured less prominently elsewhere. Plaintiffs plausibly pled that consumers purchasing these shoes online, whether on New Balance’s “Footwear Made in the USA” collection page or on the websites of third parties like Amazon, “would do so either while missing or while not understanding New Balance’s 70% qualifications stated elsewhere on the website or in the products descriptions.”

Side note: The court rejected New Balance’s argument that the complaint failed to adequately plead the content of the third party websites because it didn’t show screenshots of those sites. The court didn’t require that, because the allegations were that the plaintiffs saw the same claims as were in the “made” collection shoes’ names, on images of shoes themselves, and in the shoes’ descriptions that purchasers on or in brick-and-mortar stores would have seen.

New Balance’s reliance on the disclaimer was insufficient at this stage.  

First, plaintiffs plausibly allege that the disclaimer is too inconspicuous for the qualification to be brought to the consumers attention. Because of the prominent unqualified assertions of “Made in the USA” on the physical shoes and on the website, a reasonable consumer could see the “Made in the USA” statement and not understand it to be qualified by a disclaimer elsewhere on the product. The prominent featuring of unqualified statements creates an expectation that can make consumers less likely to process or understand less prominent qualifiers included elsewhere.

Second, plaintiffs plausibly alleged that “domestic value of 70% or greater” was inherently ambiguous and therefore unsuccessful in avoiding deception.

For shoes purchased in person at brick-and-mortar stores, likewise, the disclaimer was plausibly too ambiguous to be understood or not sufficiently prominent to be seen.

The court rejected New Balance’s reliance on a prior settlement in Dashnaw v. New Balance Athletics, Inc., 2019 WL 3413444 (S.D. Cal. 2019), involving more unqualified “Made in USA” statements in stores and on New Balance’s website. New Balance agreed that it would less prominently advertise “Made in USA” claims regarding its shoes with less than 95% domestic content and that such claims instead be accompanied with the disclosure that the “Made in USA” collection “contains a domestic value of 70% or greater.” The injunction specified that the phrase “Made in the USA” would be removed from the front of the hangtags on the shoes, the hangtag would include the sentence, “New Balance ‘made’ is a premium collection that contains domestic value of 70% or greater”, the phrase “Made in the USA” would be removed from the top of shoe boxes, any representations on the side of shoe boxes would include the 70% domestic value disclaimer, and any claims on New Balance’s website would include the same qualification. Dashnaw didn’t have preclusive effect on the plaintiffs here, who were consumers either outside of California or who purchased the shoes in California after the class period in Dashnaw.

Plaintiffs plausibly pled that New Balance was not in full compliance, including unqualified “Made in USA” claims still in use including on the tongues of shoes, in their inside label, and on the New Balance website. The top of the shoeboxes and front of hangtags no longer bear “Made in the USA” but instead feature the phrase “made” imposed on or positioned by a United States flag on shoeboxes, tags, and online. That may still deceptively imply that the shoes are “Made in the USA.”

"smoked Gouda" plausibly communicates production method, not just flavor

Castle v. Kroger Co., --- F.Supp.3d ----, 2022 WL 4776319 (E.D. Wis. Oct. 3, 2022)

The court declined to dismiss some of Castle’s claims based on alleged false advertising of “smoked Gouda” as having actually been smoked, instead of having “smoke flavor” added. Plaintiff alleged reliance on the representations “Smoked Gouda” and “Distinctive, Smoky Flavor” on the front label as a reference to the cheese having been smoked “over hardwoods” and having its taste as a result of “being smoked on hardwoods.” She alleged that “smoke flavor”—“which is smoke condensed into a liquid form”—does not “supply the rich, layered combination of phenols and other odor-active compounds compared to where a food’s taste is derived entirely from being smoked over wood.” Consumer demand for smoked foods has allegedly increased over the past two decades, a trend recognized by the cheese industry. Also, the European Food Safety Authority allegedly found that smoke flavorings in foods “contain compounds at levels which may pose a toxic risk when consumed.”

In enacting regulations for flavoring, the FDA allegedly considered the term “smoked” to be misleading when “true smoke is absorbed in a liquid or other medium, and that medium is added to food to provide a smoke flavor.” In such cases, the front label of the product allegedly should contain the description “with added smoke flavor,” “[with] natural smoke flavor,” “flavor added,” or “smoke flavored.” The FDA allegedly recently warned companies regarding product labeling and smoked ingredients. Under Wisconsin precedent, Wisconsin law adopts FDA definitions and provides a private right of action for a violation of that law (like California does).

Kroger sort of argued preemption, but really that the FDCA doesn’t provide a private right of action. This is true but irrelevant, since plaintiff was using state consumer protection law, which incorporates FDCA standards but is its own separate source of a right of action.

Under Wisconsin law

[n]o person may sell or distribute a consumer commodity in package form unless each package clearly and conspicuously identifies the commodity contained in that package. The declaration shall identify the commodity by its common or usual name, by its legally required name, if any, or by a generic name or other appropriate description that is readily understood by consumers.

How did that apply to “Smoked Gouda”? The court concluded that the common or usual name of the product was “Gouda,” and so there was no violation.

However, Wisconsin law also provides that “[t]he declaration of identity under sub. (1) may not be false, deceptive, or misleading. Ingredients or components that are not present in the commodity in substantial or significantly effective amounts may not be featured in the declaration of identity.” Claims should survive a motion to dismiss “if they have plausibly alleged that the defendants’ front labels likely lead a significant portion of reasonable consumers to falsely believe something that the back labels belie.”

Other courts have found that “smoked” could deceive consumers. Kroger responded that its package was different because it said that the cheese inside has a “distinctive, smoky flavor” and that it has “smoke flavor” added. The front label contain the words “distinctive, smoky flavor,” but that wording didn’t alert the consumer that this distinctive flavor came from an added flavoring, rather than smoking. “A consumer could read the label and conclude that the package contains Gouda that has been smoked and thus has a ‘distinctive, smoky flavor.’” The small-print ingredient list on the back of the package was insufficient. Although another court rejected claims about Strawberry Pop-Tarts related to overstatement of strawberry content, the court here noted that the Pop-Tart package didn’t claim to contain “crushed” strawberries or “fresh-picked” strawberries, or otherwise “give consumers the impression that the filling’s flavor was the result of a process.” By contrast, “smoked” “could refer either to the flavor of the cheese or to a process (one that the plaintiff alleges alters the chemical composition of the cheese itself).” This was a question of fact.

Although the plaintiff adequately pled negligent misrepresentation and fraud, the economic loss doctrine barred her claims, and warranty claims also failed; unjust enrichment was dismissed as duplicative and she lacked standing to seek injunctive relief.

Italy's #1 Brand of Pasta plausibly communicates geographic origin despite Barilla's argument it's just a TM

Sinatro v. Barilla America, Inc., --- F.Supp.3d ----, 2022 WL 10128276, No. 22-cv-03460-DMR (N.D. Cal. Oct. 17, 2022)

Along with the headline-worthy nature of the claim (“ITALY’S #1 BRAND OF PASTA” plausibly falsely communicates Italian origin), the decision contains an extended discussion of judicial notice on a motion to dismiss v. incorporation of documents into the complaint by reference, both often significant in false advertising cases.

Barilla is now headquartered in Illinois, but originated as a bread and pasta shop in Parma, Italy in the nineteenth century. Plaintiffs alleged that “authentic Italian products, including pastas, hold a certain prestige and [are] generally viewed as a higher quality product,” and that “the general ‘Italianness’ of a product influences consumers[’] overall evaluation of a product” and willingness to pay a price premium. Indeed, “Italian pasta is one of the best and most sought after products in the global market,” and “Italian durum wheat is among some of the ‘best varieties[’]” of wheat. But, because, Italy’s production of durum wheat does not meet worldwide demand, Barilla allegedly “scrambled to manufacture, market, and sell purportedly authentic ‘Italian-made’ pastas, using durum wheat that is not sourced in Italy, in an effort to gain market share and increase sales.”

Barilla allegedly reinforces its representation about the origin of the products by replicating the green, white, and red colors of Italy’s flag surrounding the “Italy’s #1” representation, when the products are manufactured in Barilla’s plants in Iowa and New York using ingredients sourced from countries other than Italy. Barilla’s Italianate campaign allegedly included websites, a Barilla Historical Archive, a Barilla Pasta Museum, and Barilla Academy, which Plaintiffs allege were “all designed to promote the brand and company’s Italian identity” and “convince consumers that Barilla® brand pastas ... come from Italian ingredients, [are] processed and manufactured in Italian factories, and then exported.”

Plaintiffs alleged that there was no “clear, unambiguous, and conspicuously displayed statement, reasonably proximate to the Challenged Representation, that reasonable consumers are likely to notice, read, and understand to mean that ... the Challenged Representation is indeed false as the Products’ ingredients are not sourced in Italy and the Products themselves are not assembled or manufactured in Italy.” Plaintiffs brought the usual California claims.

Barilla asked the court to take judicial notice of front and side-nutrition labels for Barilla-brand pastas as well as documents related to Barilla’s trademark, “Italy’s #1 Brand of Pasta.” Judicial notice deals with essentially uncontrovertible facts, while incorporation by reference is “a judicially-created doctrine that treats certain documents as though they are part of the complaint itself.” This is to prevent “plaintiffs from selecting only portions of documents that support their claims, while omitting portions that weaken—or doom—their claims.” Incorporation by reference is appropriate “if the plaintiff refers extensively to the document or the document forms the basis of the plaintiff’s claim.” But if a document “merely creates a defense to the well-pled allegations in the complaint, then that document did not necessarily form the basis of the complaint.” Further, “the mere mention of the existence of a document is insufficient to incorporate the contents of a document.” So, “while a court “may assume [an incorporated document’s] contents are true for purposes of a motion to dismiss under Rule 12(b)(6) ... it is improper to assume the truth of an incorporated document if such assumptions only serve to dispute facts stated in a well-pleaded complaint.”

The court declined to take judicial notice of the submitted image exhibits, which were presented as being taken from the same website from which plaintiffs got their screenshots, but which were blown up/annotated, and the text on the images of the packages was sometimes illegible. Nor would the court incorporate them by reference, given the parties’ dispute about whether these were good enough copies.

Barilla didn’t explain why excerpts of the file history for the “Italy’s #1 Brand of Pasta” registration were relevant to plaintiffs’ claims for false, misleading, and deceptive marketing practices, so the request for judicial notice of those excerpts was moot.

Barilla argued that plaintiffs lacked standing to seek damages/restitution because they didn’t plausibly allege they would’ve purchased a cheaper alternative or that Barilla would have charged less without the representations at issue. That flatly contradicted the allegations of the complaint, which expressly alleged that plaintiffs “would not have purchased the Product[s], or would not have overpaid a premium for the Product[s’] purported Italian origin, had [they] known that the Challenged Representation was false” and the products were actually made in the United States, using ingredients from countries other than Italy. A “quintessential injury-in-fact” can occur when a plaintiff alleges that they “spent money that, absent defendants’ actions, they would not have spent.”

Standing for injunctive relief: Plaintiffs alleged that they have “no way of determining whether the Challenged Representation on the Products is true,” and that Plaintiffs are “unable to rely on the truth of the Challenged Representation on the Products’ labels.” But they now know that the products are made in the US. The Ninth Circuit allows standing for injunctive relief where there’s a plausible threat of future harm from desire to purchase the product plus inability to rely on the advertising or labeling. But whether disposable wipes are actually “flushable”—the situation that prompted this ruling—is something that is hard for consumers to know, unlike national origin. And plaintiffs’ allegation that they’d be interested in buying the products if they were actually produced in Italy was insufficient “because it is implausible to expect such facts to come to pass.”

Barilla also challenged whether there was causation for Article III purposes, but the court rejected its argument that plaintiffs needed to do more than allege that they purchased the products and/or paid a premium for the products due to the challenged representation to establish causation. It was also premature to dismiss the nationwide class allegations (unjust enrichment/common law claims) at the pleading stage.

Standing for unpurchased products: The general rule is that “a plaintiff may have standing to assert claims for unnamed class members based on products he or she did not purchase so long as the products and alleged misrepresentations are substantially similar.” Here, plaintiffs challenged “the same basic mislabeling practice” across the Barilla products named in the complaint, including those that they purchased and those that they did not. They alleged that all of the products at issue used the same alleged misrepresentations on the primary display panel; are sold under the same brand name; and are dry pastas that are made from largely the same ingredients or types of ingredients, “milled in the same or similar manner, and manufactured into the finished Products in the same or similar manner.”

Could “ITALY’S #1 BRAND OF PASTA” mislead reasonable consumers? Barilla argued that this was its trademark and served to indicate producer source, not geographic source. Other courts have held that “[t]he mere use of a geographic reference, including a reference to the company’s historical origin, does not convey a representation about a product’s current origin.” Barilla argued that it wasn’t misleading to invoke the company’s “Italian roots.”

Nope. That was a factual issue. Plaintiffs plausibly alleged that the words, in combination with the use of Italian colors and a broader Italianate marketing campaign, deceived consumers about present origins. Prior cases involved labels that “did not explicitly connect their origin to the present day” or “exist against the backdrop of a long-standing marketing strategy expressly connected to a particular geographic location.”

Barilla argued that the products at issue “are conspicuously marked ‘Made in the USA’ with the location of Barilla’s headquarters in Illinois.” But reasonable consumers should not be “expected to look beyond misleading representations on the front of the box to discover the truth ... in small print on the side of the box.”

Lanham Act preemption: Barilla argued that its mark was incontestable under the Lanham Act and that the lawsuit here was “an end-run to attempt to cancel the Registered Trademark and must be dismissed under the doctrine of federal preemption.” “Barilla offers no authority for this argument and minimal analysis. The court cannot analyze an argument that counsel fails to develop.” Hard to imagine this working with more development, insofar as incontestability is no barrier to actual cancellation for use to deceive.

Ability to seek equitable relief under Sonner: The complaint alleged that “no adequate remedy at law exists” in light of varying statutes of limitation, since the limitations period for UCL claims is four years, which is one year longer than the statutes of limitation for the FAL and CLRA. Therefore, they argued, putative class members who purchased products more than three years prior to the filing of the complaint would be barred from recovery if they were not permitted to obtain equitable relief under the UCL.

 The court here agreed with the reasoning of courts holding that Sonner does not impose strict requirements at the pleading stage, because plaintiffs “may allege claims in the alternative at the pleading stage,” and because plaintiffs pled that equitable relief would be the only available remedy for certain timespans.

Tuesday, December 27, 2022

Update on side puzzle blog: Lumen updated, Google still not giving me details of the DMCA notice

A commenter notes in email that Google is really supposed to give me a copy of the DMCA notice, which it has not, but Lumen at least updated and was able to confirm that the sender was Rusard Ltd. and making a claim on behalf of Unidragon. If Google sent me the notice, I could try to contact the sender, but Lumen (understandably) redacts that information. 

Other useful information: Lumen says the takedown was sent August 30, 2022, which is a long processing time--and it happened before Unidragon reached out offering freebies for my review! 

exciting DMCA times on my side blog

I received a DMCA notice for my wooden puzzle blog! It was a review of Unidragon's Alluring Fox (332 pieces). 

Google did not, interestingly enough, actually provide the notice, so I don't yet know whether this was overenforcement by Unidragon (which has a counterfeiting problem by makers of cheap knockoff puzzles) or something even more bizarre. Google instead directs me to Lumen to look up the notice, but Lumen doesn't seem to have posted it yet, so that's a tad frustrating.

I counternoticed. FWIW, I chose "I am the owner of this content." I got to use my position that 113(c) is underused by pointing out that a jigsaw puzzle is a useful article (it has a function beyond portraying its own appearance, to be put together), and thus that the right of the copyright owner in PGS works lawfully made part of useful articles does not extend to photos of the useful article used as part of commentaries/reviews. Even if a jigsaw puzzle isn't a useful article, I have no problem saying this is fair use, including the photo of the entire completed puzzle, which is important to show the overall quality of the puzzle (especially given the well-known problems of piece chipping on puzzles of this genre).

Now I wait!

Monday, December 26, 2022

shipping facilitator escapes direct (c)/TM claims; alleged hinkiness not enough for contributory liability either

AK Futures LLC v. LCF Labs Inc., No. 8:21-cv-02121-JVS (ADSx), 2022 WL 17887590 (C.D. Cal. Sept. 28, 2022)

Brick and mortar infringement still exists, and this opinion considers both copyright and trademark claims. AKF sued LCF etc. for unlawfully manufacturing, importing, advertising, marketing, selling, and distributing unauthorized, counterfeit versions of its popular CAKE brand of hemp-derived Delta-8 products. The logo is registered with the Copyright Office, and AFK applied for trademark registration as well.

AKF contracted with two corporate defendants to be AKF’s third-party fulfillment intermediaries for several hundred thousand units of disposable vaping devices, batteries and related goods. Then AKF discovered that defendants had launched their own, allegedly infringing “PIE” brand, allegedly palming the products off as AKF’s “latest” spinoff brand.

Defendants allegedly used a counterfeiting network  consisting of “cover up” entities, including the relevant defendant for this motion, Mothership, of “master suppliers,” “shippers,” and “distros” to import, manufacture, sell, advertise, market, import, assemble, package, distribute, ship as many as 125,000 counterfeit units a day. Mothership was allegedly a “cover up business” that does not “actually do the transporting itself” but “provides ‘cover’ for a massive transportation operation consisting substantially of third-party contractors who provide distribution services.” Mothership’s operation was allegedly akin to Uber: it “matches an ever-changing array of third-party transportation companies ... to shipments needed on a regular basis” to distribute products to hundreds of “distros” across twenty-five states. Mothership allegedly facilitated “Bills of Lading” on behalf a shipper that contained pervasive discrepancies with respect to the identities of the account holders, shippers, and consignees.

Copyright infringement: Infringement requires unauthorized exercise of an §106 right, including the exclusive right to “distribute copies” of the copyrighted work “by sale or other transfer of ownership, or by rental, lease, or lending.”  But the distribution right does not include “the mere transportation of goods without a transfer or sale of ownership interest in the goods.” A party who merely facilitates the infringing activity cannot be directly liable for copyright infringement.

At this stage the court couldn’t decide whether or not Mothership was in fact a “freight broker” or a “shipper,” “freight forwarder,” “customs broker,” and so on. The complaint simply alleged that Mothership “causes” the transportation of counterfeited goods. However, AKF failed to state a direct copyright infringement claim against it, insofar as AKF conceded that Mothership “does not do the transporting itself.”  Also, allegations that a defendant “transported” the goods “still do not state a claim for copyright infringement.” “Transportation” isn’t listed anywhere in §106, and if that’s not enough, then arranging for transportation isn’t enough either.

What about §43(a) of the Lanham Act? “Use” is also an element of trademark infringement. Case law holds that “shippers, freight forwarders, importers, customs brokers, and consignees who do more than merely facilitate the infringement can be held liable for direct trademark infringement” as part of the distribution chain. Here, however, AKF didn’t allege that Mothership ever marketed, sold, or advertised the “Cake” mark. Instead, it alleged that Mothership facilitated substantially all “Bills of Lading,” for nationwide unauthorized Cake–branded products and matched third-party transportation companies to shipments needed to regularly distribute these products across the nation. These allegations might support a claim of contributory trademark infringement, but not direct infringement. “The facts contained in the [operative complaint] do not reflect more than a mere facilitation of the alleged trademark infringement. There are no allegations in the FAA1 to support that Mothership, in matching transportation companies to shipments needed, did anything to ‘trad[e] upon the goodwill or of association with the trademark holder.’”

The ultimate test for direct liability is whether the defendant’s acts caused confusion. “Thus, it must be the case that Mothership’s conduct of providing ‘Uber-style’ transportation services for shipment of the products somehow created confusion in the minds of consumers as to the origin of AKF’s Cake marks.” That wasn’t alleged. [This is a bit strangely phrased—the issue is confusion as to the origin of the allegedly infringing products, not the mark itself, but the court’s core point seems well taken that not everyone in the causal chain is a direct infringer. (BTW, as described by the court, “counterfeit” is not right—even if PIE infringes, it’s not counterfeit since there’s no registration even for CAKE yet, and PIE is not a copy of CAKE even if it’s confusingly similar.)]

Contributory copyright infringement: In Luvdarts, LLC v. AT&T Mobility, LLC, 710 F.3d 1068 (9th Cir. 2013), the Ninth Circuit said the “actual knowledge” or “willful blindness” mental states could satisfy the knowledge element. But in Louis Vuitton Malletier, S.A. v. Akanoc Solutions, Inc., 658 F.3d 936 (9th Cir. 2011), the court cited with approval a “know or have reason to know” standard. The Ninth Circuit then acknowledged, without resolving the discrepancy, in Erickson Products. v. Kast, 921 F.3d 822 (9th Cir. 2019), that while Luvdarts was decided after Louis Vuitton, it did not “explicitly overrule it.” Ah, the Ninth Circuit, where precedent goes to be shrugged at.

Under either the “willful blindness” or “constructive knowledge” standard, the Court finds that AKF failed state a claim against Mothership. AKF alleges that Mothership prepared “Cake-related Bill of Lading” for defendant Al Ziq, the “shipper” of record on its bills of lading. Al Ziq allegedly listed its place of business at a residential apartment complex without an apartment number while its actual principal place of business was in Ontario. AKF also alleged that Mothership “turned a willfully blind eye” to LCF, who “us[d] false aliases,” and the “highly suspicious contents of the shipments it facilitates.” But AKF didn’t allege facts that explained why those actions would alert Mothership to Al Ziq or LCF’s purported acts of infringement. It didn’t allege why Mothership would have reason to suspect that the contents would be highly suspicious. It didn’t allege that Mothership ever handled, saw, or had reason to know what the contents contained. Nor did it allege that Mothership knew of the discrepancy in Al Ziq’s business addresses or why this would alert Mothership to Al Ziq’s acts of infringement. It wasn’t clear why preparing bills of lading “would have or should have alerted Mothership to the fact that it was facilitating its client’s infringement.”

Contributory trademark infringement requires allegations that the defendant “(1) intentionally induced the primary Lanham Act violation; or (2) continued to supply an infringing product to an infringer with knowledge that the infringer is mislabeling the particular product supplied.” AKF argued that Mothership had constructive knowledge “LCF was selling counterfeit Cake branded products” but the court found the same allegations discussed for copyright to be insufficient to plausibly plead even constructive knowledge.

NY appellate court uses per-patient measure to assess statutory civil penalties for false advertising

State v. Image Plastic Surgery, LLC , --- N.Y.S.3d ----, 210 A.D.3d 444, 2022 WL 16640767, 2022 N.Y. Slip Op. 06181 (App. Div. Nov. 3, 2022)

The trial court found Image liable for false advertising of an unapproved medical procedure (removing fat cells and reinjecting them elsewhere in the patient’s body). It awarded $1,193,150 in restitution and assessed $2,962,500 in civil penalties. The court of appeals, in its own discretion, reduced the assessment of civil penalties by an order of magnitude to $285,000.

Defendants misrepresented the procedure’s efficacy in treating various medical conditions, and also stated, falsely, that the treatment was part of a study authorized or overseen by the FDA. Defendants didn’t “meaningfully dispute” that their representations of efficacy were materially misleading. And restitution was within the trial court’s discretion. Those patients didn’t receive the benefit of their bargain with defendants “because they did not receive treatment that was overseen by the FDA, affiliated with certain scientific and medical organizations, or recognized as effective in treating medical conditions.” Even if some consumers might have benefited, “essentially as a placebo, … any benefit received would be de minimis when compared to the treatment advertised.”

However, the court of appeals reduced the assessment of civil penalties ($2,500 per day for 1135 days – the approximate number of days defendants’ website operated), “since under these circumstances, the penalty is more properly connected to the number of consumers affected by the advertising.” This is an important reminder about how much discretion NY courts currently have in setting the per-incident penalty. The court didn’t suggest that the trial court abused its own discretion in using days online.

Friday, December 23, 2022

Goldfish crackers are not plausibly understood as weight control foods even w/zero sugar

Cleveland v. Campbell Soup Co., --- F.Supp.3d ----, 2022 WL 17835514, No. 21-cv-06002-JD (N.D. Cal. Dec. 21, 2022)

Plaintiffs alleged that they were duped into buying Goldfish crackers as a “healthy” and reduced-calorie snack choice because certain Goldfish packages indicated on the front label that the crackers contained “0g Sugars.” They brought claims under the consumer protection laws of California and New York law, and claims for restitution and breach of warranty.

This was not plausible. The calorie count per serving of the crackers was plainly visible to consumers on the front of the package, and so no reasonable consumer could plausibly believe that Goldfish were a health or reduced-calorie food. The court noted that the statement “0g Sugars”

does not, on its face, say anything about calories. The world is full of foods that are low-sugar and not low-calorie. Nuts, butter, olive oil, avocados, and many cheeses come immediately to mind as foods widely understood to be low in sugar but relatively high in calories. Consequently, it is not plausible to contend that a reasonable consumer would necessarily equate 0g sugars with reduced calories. That is particularly true here, where the product labels emphasize “cheddar” and “pizza” flavors, two foods that experience and common sense indicate are not good for calorie reduction purposes, “blasted” or not.

The labels underscored the implausibility: 

“A consumer does not need to read any fine print, turn the package around for details, or do anything other than look at the front label to obtain the calorie count for a cracker serving.” The label made it inherently implausible “that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances,” would understand “0g Total Sugars” to mean “low or reduced in calories.”

Plaintiffs’ use of studies and surveys didn’t help; they were mostly generic. “[A]lthough it may be true that a ‘2021 Sugar Claims Study found “that products containing claims related to sugar content were rated as more healthful and less caloric than their regular alternatives,”’ such a highly generalized observation is of little value for a label that says ‘0g Sugars’ right next to a larger-sized calorie disclosure.” Likewise for a general statement by the FDA to the effect that “[c]onsumers may reasonably be expected to regard terms that represent that the food contains no sugars or sweeteners, e.g., ‘sugar free,’ or ‘no sugar,’ as indicating a product which is low in calories or significantly reduced in calories.” The specific context controlled, and here that included a panel also disclosing calories per serving and other nutrition information.

Plaintiffs were given one last chance to amend on the possible theory that 0 sugars is literally false because Goldfish crackers “actually contain sugar.”

claims based on false movie trailer promise of Ana De Armas's presence can proceed

Woulfe v. Universal City Studios LLC, No. 22-cv-00459-SVW-AGR   (C.D. Cal. Dec. 20, 2022)

Plaintiffs rented Yesterday on Amazon, allegedly in reliance on the trailer, which contained a scene/subplot that ultimately never appeared in the final movie featuring famous actress Ana De Armas. They allegedly watched the movie because they wanted to see De Armas and the scene in the movie. Although expressing some skepticism, the court found that they stated a valid false advertising claim.

Yesterday’s protagonist is a musician who, after a head injury, discovers that no one else remembers the Beatles, and becomes famous after performing their songs. The trailer depicts his rise in part by showing him on a talk show with De Armas as the other guest; the host urges him to compose a song about her in front of the audience; the song he plays, Something, visibly affects De Armas, suggesting a potential romance between them, and they embrace. The trailer immediately cuts to the musician’s long-term love interest expressing dissatisfaction about the effects of fame on their relationship. De Armas has no dialogue, and the end of the trailer says that the movie was directed by “the Academy Award Winning Director of Slumdog Millionaire,” written by “the writer of Love Actually,” and starred Ramesh Patel and Lily James. (Apparently the scene was cut because test audiences didn’t like Patel’s flirtation with a woman other than James.)

Plaintiffs brought the usual California claims, along with claims for unjust enrichment, breach of implied and express warranty, and violation of Maryland’s Consumer Protection Act. Defendants moved to dismiss and brought an anti-SLAPP motion. In the Ninth Circuit, if the anti-SLAPP motion challenges the legal sufficiency of a complaint, it’s evaluated under Rule 12 standards; if it challenges the factual sufficiency, it’s evaluated under Rule 56 standards. This was the former type.

The trailer didn’t fall under the commercial speech exception to the statute, because, although it was commercial speech, the anti-SLAPP law provides that its commercial speech exception does not apply to “advertisement or other similar promotion ... of a motion picture.” The court, following Ninth Circuit precedent, applied anti-SLAPP law despite being a federal court, and included the Maryland claims. The trailer qualified as conduct in furtherance of the right of free speech regarding the movie, in connection with issues of public interest (the impact of the Beatles on history; the process of making movies and trailers; the fame of De Armas).

Universal’s key merits argument was that there was no actionable misrepresentation. But the standard—whether it was probable that a significant portion of relevant consumers, acting reasonably in the circumstances, could be misled—was satisfied.

Universal argued that the trailer never explicitly claimed that De Armas or her segment would be in the movie and that De Armas and the song Something only appeared for 10-15 seconds, without De Armas ever speaking. Thus, Universal argued that the alleged misrepresentation was too vague and non-specific to definitely represent that viewers would see De Armas or her segment in the movie. But explicit misstatements aren’t required. And the alleged misrepresentation here wasn’t vague or puffery. Under these circumstances, De Armas’s presence in the film was a specific, measurable claim.

Nor was this an unreasonable interpretation of the trailer, despite judicially noticed facts that some trailers include scenes that do not appear in the final movie. Plaintiffs plausibly allegedb that “[m]ovie trailers are understood by movie viewers and consumers to convey what actors will appear in the advertised film,” and that De Armas was famous, making it reasonable to expect she’d appear in the film. Also, “[i]n the scene that De Armas appears in, she is sung to by the main character, is the only person in view for several seconds, and embraces the mam character, [and subsequently] the main love interest in the movie sees this embrace and becomes/is visibly upset by it.” Even Universal acknowledged that the scene “conveys a key part of the overall story arc in the trailer: [the protagonist’s] meteoric rise to fame and how it undoes the life he knew.” Thus, “De Armas could be viewed as more than a fleeting background extra, and as a character that viewers would expect to see in the movie.” Also, while unverified internet comments were weak evidence, the inclusion of social media comments by consumers in the complaint stating that they expected to see the segment and De Armas in the movie “assists the plausibility of Plaintiffs’ claims.”

However, the court didn’t rely on an additional allegation that Universal explicitly misrepresented that De Annas was in the trailer, because the streaming service VUDU listed De Annas as a cast member, since plaintiffs didn’t watch the movie on Vudu, nor did they watch the movie on the basis of Vudu’s listing. Without further evidence, the court also didn’t rely on the Vudu listing as evidence that Vudu was deceived into believing De Annas was in the movie based on the trailer. “The Court is unaware of how Vudu determines cast members, and to infer that Vudu made this determination based off of watching the trailer would force the Court to engage in impermissible speculation.” [But discovery might be interesting.]

Universal also made a slippery slope argument: If this theory prevailed, plaintiffs could sue if a trailer didn’t represent the precise role/speaking time/etc. for an actor. The relevant limiting principle was the reasonable consumer test.

Now onto the latest trap that modern doctrine has laid for federal plaintiffs: The UCL and FAL are equitable in nature, so plaintiffs had to show that legal remedies were inadequate to qualify for monetary restitution. Did they plead lack of an adequate remedy at law? “After all, how can one plead a plausible claim seeking equitable restitution, when they have pleaded a plausible claim seeking damages at the same time?” But here, plaintiffs failed to plead a plausible claim for legal damages, so they did show lack of an adequate legal remedy.

Universal responded that plaintiffs’ inability to obtain damages resulted from failure on the merits, not from any inherent limitation on a legal remedy. The mere fact that a plaintiff may ultimately fail in proving their plausible claims for legal damages does show a lack of an adequate remedy at law. But, where CLRA or warranty claims fail as a matter of law, because the conduct wasn’t covered by the relevant statutes, plaintiffs lack an adequate remedy at law.

Universal also argued that plaintiffs received the benefit of their bargain. But this was not established as a matter of law. Universal noted that the price of the stream, $3.99, would not have changed regardless of whether De Armas or the segment were in the movie or not. But plaintiffs alleged that they weren’t provided with what they paid for, and that it had less value than what they were promised, and that was enough at the pleading stage.

UCL: Under the unlawful prong, an ad must violate another “borrowed” law to be actionable. The fraudulent UCL and FAL claims qualified. Plaintiffs also argued that there was a Lanham Act false advertising violation, but they didn’t sufficiently plead that they were injured in the relevant way: “either by direct diversion of sales from [themselves] to defendant or by a lessening of the goodwill associated with their products.” This was not to say that the Lanham Act couldn’t be used as a predicate violation for the UCL, just that they hadn’t plausibly done so.

The CLRA covers “unfair methods of competition and unfair or deceptive acts or practices undertaken by any person in a transaction intended to result or which results in the sale or lease of goods or services to any consumer.” Goods, by statute, must be tangible. But buying a limited-time license to stream a digital copy of Yesterday was neither a tangible good nor a service under the CLRA. The Court agrees. Although Yesterday itself was fixed in a tangible medium, what plaintiffs purchased was an intangible good. Likewise, though the limited-time license could be interpreted as a provision of video streaming services, “the video streaming services provided by Amazon are irrelevant to Plaintiffs’ claim,” which depended on the underlying content of the movie.

Similarly, warranty claims failed, because plaintiffs failed to allege a transaction of consumer goods that would invoke either express or implied warranties. “A ‘warranty’ that the DVD is without scratches that render the movie unplayable is different from a warranty that makes a representation about the underlying contents of the movie.” For claims about the latter, plaintiffs needed to allege some transaction involving the underlying intellectual property, but the right to stream the movie for a limited time “in no way implicated the rights to the underlying movie itself.”

Also, plaintiffs lacked standing to seek injunctive relief. Neither a vague interest in watching a rerelease with De Armas added back, nor anticipation of buying or renting other movies advertised by Universal, was sufficient, since plaintiffs didn’t allege that Universal’s misrepresentations would cross over film to film.

First Amendment: Plaintiffs sufficiently alleged that the trailer was false, commercial speech, defeating a First Amendment defense. Universal argued that the trailer “bears all the hallmarks of noncommercial speech: it is an audiovisual work that uses images, music, and dialogue to express a story, including the themes and story arc that are contained in the full-length motion picture,” and that permitting liability based on the inclusion of the scene would interfere with Universal’s editorial choice in violation of Miami Herald Publ’g Co. v. Tornillo, 418 U.S. 241 (1974).

Factors supporting a commercial speech characterization include “[l] the speech is an advertisement, [2] the speech refers to a particular product, and [3] the speaker has an economic motivation.” Those were all present. The fact that the ad told a story didn’t make it noncommercial speech, since almost any ad for a product can tell a story. “At its core, a trailer is an advertisement designed to sell a movie by providing consumers with a preview of the movie.” Excercising editorial discretion with respect to the content of commercial speech doesn’t make it noncommercial.

Universal argued that it wasn’t plausible that “the primary reason the Segment was included in the Yesterday trailer was for economic, as opposed to artistic, reasons.” This framing was too narrow. “The commercial speech in question is not the specific segment in question, but the trailer as a whole. Viewed in this light, it is a reasonable inference that the trailer as a whole was made for the primary pmpose of selling tickets, copies, and rentals of the movie.”

Was the commercial character of the speech “inextricably intertwined” with fully protected speech? Universal argued that the De Armas segment was inextricably intertwined with the movie itself and the rest of the trailer, entitling it to full First Amendment protection. But again, that was wrong. “[T]he fact that the Segment (commercial speech) is inextricably intertwined with the rest of the trailer (commercial speech) does not result in the conclusion that commercial and non-commercial speech are inextricably intertwined.” It’s true that the scenes from the movie would be noncommercial when used as part of the movie, “when these scenes are used in the context of the trailer, they become commercial speech.” Of course, truthful ads for expressive works are inherently noncommercial speech because they come from the underlying work, but that wasn’t the case here.

Universal also invoked Rogers v. Grimaldi, which has been applied to Lanham Act claims, unfair competition claims, and false advertising claims, and argued that it should extend to consumer protection claims, especially since plaintiffs were trying to borrow a Lanham Act violation. But that had been kicked out, leaving no need to use Rogers, “a rule of construction to avoid conflict between the Constitution and the Lanham Act.” Also, the court was “skeptical” that the Rogers framework would apply outside of the context of a trademark claim.”

Thursday, December 22, 2022

"ripe strawberry" and "made with wildflower honey" plausibly misleading where product not obviously highly processed

Hoffmann v. Kashi Sales, L.L.C., No. 21 CV 9642 (VB), 2022 WL 17823171 (S.D.N.Y. Dec. 20, 2022)

Hoffman alleged violations of Sections 349 and 350 of New York’s GBL; violations of the consumer fraud acts of Montana, Virginia, Delaware, and Kansas; breach of express warranty; breach of the implied warranty of merchantability; violation of the Magnuson Moss Warranty Act (“MMWA”); fraud; and unjust enrichment, all based on the assertion that defendant misrepresents the amount of strawberry and honey in its “Ripe Strawberry Soft Baked Breakfast Bars.” Some of the claims survived a motion to dismiss.

The front packaging allegedly prominently displays the words “Ripe Strawberry” and, in smaller letters, “Made with Wildflower Honey,” “3g Fiber,” “10g Whole Grains,” and “Non GMO Project Verified” and depicts an enlarged breakfast bar with red filling: 

The back label depicts two large, “fresh, ripe” strawberries and scattered oats, and reads, in relevant part, “These bars were made for you with love.... Love for simple ingredients, like strawberries and whole grains.” The back label also describes the Product as “Simply Delicious” and “Delightfully Nutritious”:

This allegedly leads reasonable consumers to expect “more strawberry ingredients in the filling than non-strawberries, and more honey than non-honey sweetening ingredients.” But the filling actually contains more apples and pears than strawberries, and the Product as a whole contains more sugar and tapioca syrup than honey. Red elderberry juice concentrate allegedly is added to the filling to boost its red color. Kashi’s reputation as “a leading seller of organic and healthy snacks, known for being transparent with its ingredients and corporate identity” also allegedly encourages consumers to trust defendant’s labels.

Hoffman alleged that consumers prefer strawberries to apples and pears, in part because strawberries confer health benefits that apples and pears do not, and that consumers seek out products sweetened with honey instead of sugar because honey occurs naturally and has a lower glycemic index.

Strawberry claims: Though a close call, plausible at this stage. “[S]ome presence of strawberries combined with an accurate ingredients list does not foreclose the possibility that the packaging is misleading.” The court rejected Kashi’s argument that “ripe strawberry” was only presented as the flavor, and not as an ingredient. The back packaging says defendant’s snacks were made with “[l]ove for simple ingredients, like strawberries and whole grains.” Using “Ripe” to modify “Strawberry” on the front packaging bolstered the implication that real, ripe strawberries are present in the Product. A reasonable consumer might believe that strawberries were the predominant fruit ingredient in the filling. The large, bold font of “Ripe Strawberry” with “Soft Baked Breakfast Bars” in significantly smaller, unbolded font below suggested that “Ripe Strawberries” were a central component, and combined with the back images/text to make the claim plausible.

The instant case was distinguishable from recent cases holding the packaging of Strawberry Pop-Tarts could not plausibly mislead a reasonable consumer into believing the Pop-Tart filling contained mostly strawberries. The front packaging characterized those products as “pastries,” and pictured a product with a bright red, unnaturally colored filling, unlike the strawberry jam-like color pictured here. “Accordingly, the Pop-Tarts packaging portrayed a processed breakfast treat more akin to the packaging of sugary breakfast cereals, the latter of which courts routinely find could not have reasonably portrayed a product with predominantly fruit ingredients.” But the product here was presented as being made “with simple ingredients, like strawberries and whole grains” such that it is “Delightfully Nutritious.” “It is plausible these representations could reinforce a reasonable consumer’s understanding, based on the front packaging, that the filling’s predominant fruit ingredient is strawberries.”

Honey: Same result. “Made with Wildflower Honey” presented honey as an ingredient, not a flavor. And the use of “Wildflower” to describe the honey “bolsters the impression that actual honey is in the Product.” Hoffman alleged that a survey highlighted in “Prepared Foods” magazine in 2018 noted that “60% of consumers ... look for honey on the product label” and that “about half of consumers would pay at least 5% more for food ... primarily sweetened with honey.” Other cases favoring defendants were distinguishable because, in those cases, honey was presented as a flavor instead of an ingredient.

Even though honey wasn’t presented as the primary ingredient, that didn’t matter given the allegations that honey is a preferred ingredient “specifically sought out by consumers.”

Breach of express warranty: dismissed for failure to allege sufficient pre-suit notice. Breach of implied warranty claim failed for want of privity. This also got rid of the federal Magnusson-Moss Warranty Act claims. Fraud failed for want of sufficient allegations of fraudulent intent. Allegations of a profit motive to deceive consumers by charging more were insufficient, as were allegations that “the records [d]efendant is required to maintain, and/or the information inconspicuously disclosed to consumers, provide it with actual and/or constructive knowledge of the falsity of its misrepresentations.” Unjust enrichment failed as duplicative.

HP's purported discounts were plausibly misleading

Carvalho v. HP, Inc., 2022 WL 17825688, No. 21-cv-08015-BLF (N.D. Cal. Dec. 20, 2022)

Plaintiffs alleged that HP displays false and inflated “strikethrough” prices on its website for its products that it then offers to consumers at a purported “discount price.” At the bottom of each page, HP includes a section entitled “Disclaimer +”. Clicking on the “+” expands the Disclaimer section. One of the disclaimers makes clear that the strikethrough price is a Manufacturer’s Suggested Retail Price (MSRP):

HP’s MSRP is subject to discount. HP’s MSRP price is shown as either a stand-alone price or as a strikethrough price with a discounted or promotional price also listed. Discounted or promotional pricing is indicated by the presence of an additional higher MSRP strikethrough price.

Near the strikethrough price and typically in a larger and bolder font, HP advertises a “sale price.” The website also advertises discounts of savings using words such as “Save,” “You’ll Save,” and “You Saved.”

Plaintiffs alleged, with examples, that the strikethrough prices do not represent the actual prices at which computers were sold or offered for sale for a reasonably substantial period of time. In addition, HP allegedly falsely advertises that the discounts are available only for a limited time when in fact those discounts continue beyond their advertised expiration date, such as “Weekly Deals” that sometimes don’t end for months. Further, plaintiffs alleged that

the “vast majority” of computers (e.g., 152 out of 155 models) sold on HP’s website are sold exclusively on HP’s website and not from traditional big box retailers.

The court noted that plaintiffs couldn’t proceed on theories involving allegedly false limited quantity offers because they didn’t allege they relied on those.

Price discounts: The cases divide price comparison cases into two categories: cases involving “exclusive products” and those involving “non-exclusive products.” In the former, cases can proceed where the plaintiff alleges a false comparison (a different product from that sold exclusively at the store is used for the comparison “full price” for the exclusive product, which was never actually sold at that price). Where other retailers offer the same product for sale, there are legitimate prices to which to compare the defendant’s comparative reference price, and a plaintiff must show that the comparative reference price is misleading.

HP argued that its products were sold at other retailers, putting this case in the latter category. But the court found that the facts didn’t fit neatly into either category. “According to Plaintiffs’ allegations, which are based on a thorough investigation and must be taken as true at this stage, the majority of the relevant HP products are not sold at traditional big box retailers, suggesting they are not non-exclusive products.” But there were also no allegations that HP was selling these products at some sort of discount or outlet store.

The court turned to the “reasoning underlying both non-exclusive and exclusive products cases: whether a price is false or misleading in light of the price(s) at which that item is generally available for purchase.” Plaintiffs alleged that, based on their investigation, very few of these products were available for purchase at third-party retailers. And, of those that were available, the prices were all somewhere between the HP strikethrough price and the HP sale price. In addition, “the particular facts as to whether the [strikethrough] prices are fictitious are likely only known to [HP].” The court also took into account the prices for which the products were available before and after plaintiffs’ purchases on HP’s own site. Plaintiffs were not required at this early stage to do an investigation of every HP product; they adequately alleged that the strikethrough prices were misleading.

Would that deceive a reasonable consumer? The MSRP disclaimer was not enough, nor was the absence of words like “regularly,” “usually,” “formerly,” and “reduced to” from the prices or HP’s argument that consumers understand that manufacturers often provide a discount from the MSRP. “[T]he fact that a consumer could only learn that the strikethrough price is a MSRP upon reading the fine print at the bottom of the webpage and then clicking on the ‘+’ suggests that a reasonable consumer could justifiably be unaware of that disclaimer.” This required factual development.