Wednesday, May 03, 2023

Second Circuit finds "therapeutic grade"/physical effects claims for essential oils falsifiable; suggests that lack of substantiation violates NY law

MacNaughton v. Young Living Essential Oils, LC, 2023 WL 3185045, No. 22-0344, -- F.4th -- (2d Cir. May 2, 2023)

In 2020, NAD found that Young Living’s claims that its essential oils are “therapeutic-grade” and impart physical and/or mental health benefits were “unsupported.” But MacNaughton had already spent money on Young Living’s products, including lavender oil advertised to “promote[] [a] feeling of calm and fight[] occasional nervous tension” and peppermint oil that allegedly “helps to maintain energy levels.” Feeling misled by claims that the product would have effects like “promot[ing] feelings of relaxation & tranquility,” MacNaughton sued under common law and various state statutes, including NY’s GBL.  The district court claims that its products would do things like “help[] to maintain energy levels” was run-of-the-mill puffery.

Relying on Int’l Code Council, Inc. v. UpCodes Inc., 43 F.4th 46 (2d Cir. 2022), the court of appeals reversed, though it did affirm the dismissal of warranty claims.

Young Living instructs its salespeople that in “describing therapeutic-grade oils,” they should mention that “every essential oil . . . has the highest naturally-occurring blend of constituents to maximize the desired effect.” The website also formerly contained a statement that though the therapeutic-grade “promise” was “bold,” the salesperson could “share [the] products with confidence, knowing that Young Living truly has the experience to produce essential oils that work.” Similar guarantees remain on Young Living’s “various blogs and other websites.” Young Living continued to advertise the products as being “therapeutic-grade.” MacNaughton cited three studies, all of which conclude there is insufficient evidence to find that aromatherapy is an effective treatment of anxiety or of any other type of condition.

The breach of warranty claims were properly dismissed because MacNaughton failed to allege proper notice and privity of contract.

Puffery comes in two forms (1) subjective statements that cannot be proven true or false and are therefore non-actionable puffery as a matter of law and (2) objective statements that can be proven true or false but are so exaggerated that no reasonable buyer could justifiably rely on them.

Under category one, claims that a website designed to compile construction codes “provides a complete understanding of relevant material” and that the author of a book on animals “thoroughly researched dozens and dozens of animals” have been deemed non-actionable puffery as a matter of law. Under category two, claims can be falsifiable but “so patently hyperbolic that any allegations that it misled consumers are facially implausible,” such as a bubblegum brand advertising that its gum permits chewers to “blow a bubble as big as the moon.” “Yet, if the company falsely advertised that you could ‘blow a bubble bigger than your own head,’ it is plausible that a reasonable buyer could be misled.”

“Once the statement is identified as both provable as false and plausible, a defendant can only prevail on the puffery defense after a fact-intensive inquiry on how a reasonable buyer would react. That inquiry cannot be resolved at the pleadings stage.” That was the case here. Young Living’s statements about its “therapeutic-grade” oils having health and medicinal benefits are both provable and not “so patently hyperbolic that any allegations that it misled consumers are facially implausible.”

“Therapeutic-grade” was “not a subjective or vague term, but rather one that represents the item possesses a degree of quality as to produce healing.” It was distinguishable from grade + “adjectives that are merely general representations of superiority” such as “superior grade” or “prime grade.”

The ad context was also relevant:

Along with the “therapeutic-grade” label, Young Living also promised that each Product would produce particular medicinal or physical effects, such as “promot[ing] a sense of clarity and focus.”  Additionally, Young Living directed its salespeople to emphasize that every oil “has the highest naturally-occurring blend of constituents to maximize the desired effect” and that “Young Living truly has the experience to produce essential oils that work.” The accuracy of all these statements and claims is provable. ‘’

NAD/NARB rulings weren’t binding, but were relevant to the plausibility of deception of a reasonable consumer. These claims were all provable, and they weren’t patently hyperbolic. Thus, puffery couldn’t be resolved on a motion to dismiss.

In addition, the court rejected Young Living’s argument that the plaintiff alleged only lack of substantiation, not falsity. Notably, “Young Living does not cite any binding case law to support its argument that the New York General Business Law does not protect against advertising that lacks substantiation.”

Unjust enrichment was also sufficiently pled.

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