bad influence: claims against vodka producer proceed, including failure to disclose endorser payments

Sava v. 21^st Century Spirits, LLC, 2024 WL 3161625, No. 22 C 6083 (N.D. Ill. Jun. 25, 2024)

21^st Century sells Blue Ice Vodka and uses influencers to promote it. Plaintiffs brought claims under the state consumer protection statutes of Florida, Illinois, and California, as well as unjust enrichment, negligent misrepresentation, and breach of express warranty. Some of their claims survive.

Plaintiffs challenged representations that Blue Ice is “handcrafted,” is manufactured in a distillery owned by 21st Century, is filtered four or five times, “tastes better than other vodkas,” has between 52 and 57 calories per ounce, and is “fit-friendly” and has “health benefits,” including that it helps with personal fitness and weight management. In addition, they challenged failure to disclose 21^st Century’s relationships with influencers, one of whom stated that she makes Blue Ice cocktails that have fewer calories than an apple, allegedly implying that Blue Ice “is the healthier alternative.” Plaintiffs alleged that Blue Ice (1) is not “handcrafted” but is, rather, “industrially manufactured” by machines without the “constant supervision of a human,” (2) is not filtered multiple times but is, rather, filtered only once, (3) is not better tasting than other vodkas but is, rather, “inferior,” “generic,” “substandard,” and “low quality,” (4) is not a “healthy product” that helps with personal fitness and weight management but is a product that “poses significant health risks,” and (5) is not manufactured in a distillery owned by 21st Century but is, rather, manufactured as a “private label” for 21st Century at a distillery owned by Distilled Resources Inc. Despite that, to give the impression that Blue Ice is manufactured in a distillery owned by 21st Century and dedicated only to the production of Blue Ice, 21st Century allegedly includes on the Blue Ice website a doctored photograph of the Distilled Resources distillery, digitally placing the Blue Ice logo over the distillery’s actual sign.

allegedly altered sign

actual industrial production facility, as alleged

They further alleged that Blue Ice does not, as alleged, have either 52 or 57 calories per ounce but has, instead, no fewer than 64 calories per ounce. Nor does Blue Ice have only 52 calories per serving; rather, Blue Ice has at least 96 calories per serving.

Skipping a lot of procedural stuff: While plaintiffs’ allegation that one influencer “compares vodka with an apple, suggesting that vodka is the healthier alternative” paraphrased the actual statement (“I make fit-friendly cocktails that have fewer calories than an apple.”), “it is not for the court to decide on a motion to dismiss whether a consumer might or might not reasonably understand the Influencer’s actual representation to suggest.” Also, whether “handcrafted” may be deceptive in a particular case depends, at least in part, on the size of the brand holding its products out as “handcrafted,” and plaintiffs sufficiently alleged that Blue Ice was not a mass seller, so reasonable consumers could believe it “handcrafted” its vodka.

However, “best tasting” was puffery in the context of the statement “We are handcrafted and American made with a singular goal – to create the best tasting vodka. Because taste is everything.”

Disclosure of material connections: The court reasoned that, although the states had adopted FTC rules and guides as their own, the guides remained only guides, not the source of per se violations of statutes like FDUTPA (Florida’s law). Nonetheless, Florida had still instructed that “due consideration and great weight shall be given to the interpretations of the Federal Trade Commission and the federal courts relating to [Section] 5(a)(1) of the Federal Trade Commission Act” when courts are construing “unfair or deceptive acts or practices in the conduct of any trade or commerce.”

Plaintiffs alleged both representations and omissions that could meet the relevant standard. “[T]he court finds it nearly frivolous to argue that a reasonable consumer might not be deceived by defendants’ representations that Blue Ice is filtered multiple times or has as few as 52 calories per serving. These representations are specific and unambiguous and simply cannot be given to ‘fanciful interpretation.’ Put another way, these representations are the antithesis of puffery.” Likewise, “it is difficult to comprehend how a reasonable consumer could not be deceived by 21st Century’s representation on the Blue Ice website, where 21st Century has allegedly doctored a photograph of the distillery by placing its own logo over the logo of the actual distillery.” And, as to claims that the vodka had health benefits that may help with personal fitness and weight management, the Alcohol and Tobacco Tax and Trade Bureau (TTB) views such representations as “mislead[ing] consumers by presenting incomplete information about the health effects and nutritional content of alcohol beverages.” This didn’t control the outcome, but it “strongly suggests that a reasonable consumer might be misled.”

Defendants also argued that “there is no allegation of an endorsement,” and “a photograph [of an Influencer] holding Blue Ice or mentioning [that] a cocktail was made with Blue Ice ... is not an endorsement or advertisement within the meaning of Section 255.5 [of the FTC Endorsement Guides].” The court gave this argument way more weight than it deserved, noting that many of the posts involved far more than holding/mentioning. The court pointed to posts like, “There’s nothing better than relaxing with a smooth @blueicevodkausa cocktail in hand after a long day. With only 52 calories a serving, no sugar added and gluten free, Blue Ice can definitely help you stay fit during quarantine. Have a bottle delivered to your door ... . #fitfriendlyvodka #ketofriendly #potatovodka #vodka.” Anyway, the FTC considers “testimonials” interchangeable with endorsements, meaning “any advertising message ... that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser.” “Drawing all reasonable inferences in plaintiffs’ favor, at least a significant majority of these posts qualify.”

21^st Century argued that reasonable consumers would know that the influencers were paid and thus didn’t need disclosure. Plaintiffs specifically alleged that they took the influencers to be offering “honest advice” about Blue Ice and “would not have purchased [Blue Ice] products if they knew that the Influencers were paid” to promote it. And disclosure “might materially affect the weight or credibility of the [Influencers’] endorsements.”

Florida’s safe harbor didn’t apply because, although the TTB approved the Blue Ice label, the alleged misrepresentations appeared only on the secondary label and bottle collar, as well as the website/social media, none of which were approved by the TTB.

So too with Illinois law, despite defendants’ arguments that their conduct wasn’t in Illinois: “[W]here an Illinois consumer purchases a product in Illinois that a company has marketed to Illinois and distributed for sale in Illinois, the transaction has occurred ‘primarily and substantially’ in Illinois.” Unjust enrichment under Illinois law survived, but not under Florida law because of an unanswered argument that Florida law requires that any benefit must be directly conferred on the defendant by the plaintiff. Express warranty claims failed for want of privity.

 

Initial thoughts on Elster

In part so as not to repudiate big chunks of Tam/Brunetti, the Court instead delivers a major rebuke to Reed v. Town of Gilbert, 576 U.S. 155 (2015) (content-based regulation triggers strict scrutiny), except it doesn’t tell us the scope of the change. The Court seems to rely on the idea that we aren’t really worried that the registration system is government suppression of specific ideas. If so, why did the sign regulations of a city trigger that worry? And, trademark-specific question, does that mean that trademark infringement claims are also not worrisome, or does the difference between denying the benefits of registration and the full suppression/punishment of infringement (and sign ordinances) matter? The swing away from Reed, which less than ten years ago was a major innovation that seemed highly deregulatory, is another example of how the weight of Trump-appointed judges is quickly changing the "conservative" approach to First Amendment free speech doctrine in ways that create divisions among conservatives, as even this relatively unimportant issue demonstrates. (My article with Mark Lemley doesn't cover Elster, but it talks a bit about this dynamic.)

Justice Thomas’s project of dismantling modern defamation law is the undercurrent of his insistence that history and tradition answers the question here. Trademark, conveniently for him, even uses the word “reputation”! Justice Barrett does a good job of showing that history and tradition doesn’t give anything like an answer without also picking a level of generality according to some other principle—since modern registration doesn’t have a history and tradition until the 1940s. This leads her to a surprisingly Breyer-like place of balancing interests.

Under Thomas’s approach, we learn that it just doesn’t matter how tailored the rule is to the underlying interest in protecting against fraud/false connections with people/free riding on their reputations, because 2(c) is enough like previous doctrines reserving rights in names to people who have those names. That reads like a jump away from strict scrutiny right down to rational basis scrutiny, which is concerning, especially since we don’t know what “enough like” means. Next up in registration: flags? Special protections for wines and spirits?

Dilution: tarnishment’s obvious viewpoint-discrimination problem remains untouched by this decision. Some parts of the opinions suggest openness to blurring, whatever the hell blurring is: Defenders of blurring will point to the opinions’ discussions of protecting “reputation” and deterring free riding as legitimate justifications for trademark registration bars, without inquiry into the contours of those concepts or the difference between registration bars and infringement, as well as Thomas’s discussion of the Gay Olympics case, S.F. Arts & Athletics, Inc. v. USOC, 483 U.S. 522 (1987). (Ah yes, the grand history & tradition of making USOC-specific laws.) On the other side, the lack of historical precedent for blurring seems like a problem for some number of Justices (even if a free-riding-based cause of action might be ok). Uncertainties are multiplied by the explicit “good for this day and train only” statements in Thomas’s opinion, as against Barrett’s call for an actual rule of general applicability. For example, I think it would clearly be a mistake to read this opinion as holding that personality interests could justify prohibiting Elster from selling shirts that say TRUMP TOO SMALL, despite the lack of much explicit discussion in the opinions. But that just takes us back to the question of S.F. Arts & Athletics.

Is a free trial version "commercial speech"?

Enigma Software Gp. USA LLC v. Malwarebytes Inc., 2024 WL 2883671, No. 17-cv-02915-EJD (N.D. Cal. Jun. 6, 2024)

This is the latest decision in long-running litigation over Malwarebytes’ characterization of Enigma’s competing cybersecurity and anti-malware software as “malicious,” a “threat,” and as a Potentially Unwanted Program (“PUP”). The court refuses to dismiss Malwarebyte’s claims for violations of the Lanham Act; violations of New York General Business Law § 349; and tortious interference with business (the last on the ground that the 9^th Circuit already said it was sufficiently pled).

Malwarebytes argued that its characterizations of Enigma’s products as “malicious” and a “threat” didn’t occur in commercial advertising or promotion but rather as part of the operation of its products. The court characterized this as a fact-driven question (raising the issue of whether the jury will be asked to decide it).

screenshot of Malwarebytes characterizing Enigma programs as threats; green "upgrade now" button at top of screen

There’s no categorical rule that in-product statements are immune from Lanham Act claims. Here, the allegations sufficiently stated a marketing context. (It’s not clear to me, but it’s possible that the court is holding that this is true only to the extent that they were presented with the free version with an upselling invitation. I think that, as to the free trial version, this is difficult--Eric Goldman doesn't--it seems to me distinguishable from the database ROP cases where people get truthful information about other people during a free trial and also an invitation to access further/more entries in the database, because Malwarebytes is offering a non-informational service--removing programs--in the upsell, not additional noncommercial speech content. But it does seem like an edge case.)

Were the statements in an advertisement? The court reasoned that, although the words at issue—“malicious” and “threat”—were not themselves advertisements, “Enigma has alleged facts permitting an inference in its favor that Malwarebytes makes the speech in an advertising context.” Specifically, it alleged that the words appeared “during a free trial period designed to showcase Malwarebytes’s product capabilities,” so that the users experience “a marketing mechanism for Malwarebytes to entice users to ultimately purchase the Malwarebytes products.” Enigma alleged that Malwarebytes displays the challenged speech directly alongside buttons with phrases such as “Upgrade Now.” See SAC ¶¶ 118–19 (depicting scan results with “threats” near “Upgrade Now” button). This was plausibly an advertisement for purportedly superior products.

Other relevant factors—whether the speech refers to a particular product and whether the speaker has an economic motivation—also weighed in favor of characterizing this as commercial speech. (The court also cited the competition between the parties as relevant to satisfying the Gordon & Breach test for commercial advertising or promotion, even though Lexmark should probably be understood as removing that requirement.)

Enigma also sufficiently alleged that the statements were made to encourage people to buy Malwarebytes’ products and were sufficiently disseminated to the relevant purchasing public, even though only existing Malwarebytes customers saw the designations, because Enigma alleged that the majority of Malwarebytes users are free users and not paying customers, and that Malwarebytes’s sales model relies on its free programs to function as advertisements to induce users to upgrade to paid products. Malwarebytes allegedly displays the challenged designations to all consumers who seek to simultaneously deploy both Malwarebytes and Enigma products.

Material deception: Malwarebytes argued that it sufficiently disclosed to consumers its definitions for “threat” and “malicious,” as well as the specific criteria used to reach those designations, so that a reasonable consumer would understand that the challenged designations did not identify Enigma’s software as malware. In addition, it argued, because the Ninth Circuit held that the “PUP” classification was not an actionable statement of fact under the Lanham Act, the challenged designations were not materially deceptive because they were a disclosed result of the PUP classification and specifically were not statements that Enigma’s products were malware.

The court disagreed. Enigma alleged that it received hundreds of complaints from users of its products who had viewed Malwarebytes’s designations, and that the complaints included statements indicating that the users understood the designations to identify Enigma’s products as malware. Customers allegedly canceled orders for Enigma’s software and requested refunds, which allowed the court to infer that the statements influenced users’ purchasing decisions. The disclosures weren’t dispositive at the motion to dismiss stage.

The NYGBL claim survived for the same reasons.

where ingredients list can't clarify ambiguity, "manage blood sugar" claim is plausibly misleading

Prescott v. Abbott Laboratories, --- F.Supp.3d ----, 2024 WL 2843092, No. 23-cv-04348-PCP (N.D. Cal. Jun. 5, 2024)

Abbott Laboratories’s Glucerna line of powders and shakes are marketed as scientifically designed for people with diabetes to help manage blood sugar. Plaintiffs alleged that because the products contain sucralose and other additives, the products don’t provide the promised health benefits. They brought the usual California statutory claims. The court accepts the allegations as sufficient, except for standing for injunctive relief.

The challenged language includes “to help manage blood sugar,” “#1 doctor recommended brand,” and “scientifically designed for people with diabetes.” The side label states that the beverages are “designed to help minimize blood sugar spikes in people with diabetes compared to high glycemic carbohydrates.”

one of the challenged products with front label claims

“Online and in stores, Glucerna shakes and powders are placed with health and nutritional supplements near diabetes diagnostic equipment and blood glucose tests. One retailer specifically categorizes Glucerna products as ‘Diabetes Management’ on its website.” Plaintiffs alleged that the artificial sweetener used, sucralose, is associated with obesity, type 2 diabetes (as well as its precursor condition, metabolic syndrome), hypertension, and cardiovascular disease; that sucralose can deregulate blood sugar by disrupting the gut microbiome and killing pancreatic cells that release insulin; and that sucralose can cause cells to become resistant to insulin, which can lead to type 2 diabetes or obesity. Several organizations, including the World Health Organization, have advised against consuming sucralose and other artificial sweeteners. Plaintiffs cited similar scientific findings for the additional ingredients maltodextrin and carrageenan.

They alleged that “#1 doctor recommended brand” and “scientifically designed for people with diabetes” conveyed that Glucerna products “aid in managing blood sugar generally” and are “scientifically capable of the treatment of diabetes or other health conditions.”

Abbott argued that the labels didn’t make such broad claims: they didn’t plausibly advertise that the products were “over-the-counter aids to help manage diabetes and blood sugar generally” and “can be used to regulate, achieve, and manage normal and healthy blood sugar levels.” Instead, the drinks were merely intended as a “snack or meal replacement” formulated “to help minimize blood sugar spikes in people with diabetes compared to high glycemic carbohydrates.”

This was a factual question. And unlike in other cases where an ambiguous label could be easily clarified by reading the ingredient list, the side label explanation about minimizing blood sugar spikes didn’t directly contradict the claims that plaintiffs alleged they took away. “This is not the sort of ambiguity that can be definitively resolved by reference to a back label.” Plaintiffs also  plausibly alleged that the other claims on the front label—that Glucerna products are recommended by doctors and scientifically designed for diabetics—make more sweeping representations about how the products work.

As for the alleged harms of the ingredients, Abbott argued that the studies cited didn’t support the claims and that plaintiffs had layered inference on top of inference. This was a factual question that could not be resolved at this stage. “If the allegations directly contradicted the cited studies plaintiffs’ allegations might fairly be deemed implausible, but that is not the case here.” 

However, plaintiffs’ alleged intent to buy Glucerna products again in the future if they can be sure the products will provide the promised benefits was insufficient; because of the nature ofe the alleged deception, they could easily determine based on the ingredients list whether Glucerna had been reformulated without the challenged ingredients.

"#1 Brand" claim was literally false because of apples-to-oranges comparison

Zesty Paws LLC v. Nutramax Labs., Inc., No. 23 Civ. 10849 (LGS), 2024 WL 2853622 (S.D.N.Y. Jun. 4, 2024)

Finding Zesty Paws’ “#1 Brand” claim literally false, the court grants a preliminary injunction despite Zesty Paws’ attempt to create a factual dispute about what a “brand” is.

Nutramax and Zesty Paws are direct competitors in the pet supplement market. Zesty Paws’ products claim to promote joint health (Mobility Bites), behavioral health (Calming Bites), gut health (Probiotic Bites) and skin and coat health (Skin & Coat Bites). Nutramax’s products are intended to support similar pet health needs: joint health (Cosequin and Dasuquin), behavioral health (Solliquin), gut health (Proviable) and skin and coat health (Welactin).

Zesty Paws began an advertising campaign claiming to be (1) the “#1 Brand of Pet Supplements in the USA,” (2) “USA’s #1 Brand of Pet Supplements” and (3) the “#1 selling Pet Supplement Brand in the USA.” Nutramax and Zesty Paws stipulated that, at relevant times, (1) the combined sales of Nutramax pet supplement products exceeded the combined sales of Zesty Paws pet supplement products and (2) the combined sales of Zesty Paws pet supplement products exceeded the combined sales of each individual pet supplement product sold by Nutramax, including Cosequin and Dasuquin. (This seems like a classic apples-to-oranges comparison. Zesty Paws even uses “TM” on some of its advertising for, e.g., the Mobility Bites, suggesting that it’s trying to have sub-brands too, though it may have dialed back on that attempt for purposes of this litigation.)

#1 selling pet supplements brand in the USA ad from website

Mobility Bites image using TM symbol after Mobility Bites

The court found that Nutramax showed that the claims were likely literally false. The dispute turned on what a “brand” is; Zesty Paws argued that Nutramax was not a brand, but Cosequin etc. were. 

Based on the ordinary dictionary meaning of “brand,” Nutramax was a brand. Nutramax also offered two experts from business/management schools who testified that Nutramax satisfied the definition of a “distinctive feature … that identifies goods or services.” It’s used on every package and in advertising. Zesty Paws’ arguments to the contrary critiqued the strength of the brand, not its existence; Zesty Paws argued that it was the #1 “driver brand” in the US, that is, “the brand name that plays the primary driver role in a consumer’s purchase decision.”

But that didn’t create ambiguity. The ordinary meaning of “brand” didn’t include the primary driver concept. (A brand can be a limping mark!)  And there was no evidence that consumers understood the #1 Claims to refer to a “driver brand,” whether from expert opinion, survey, academic literature or even anecdotal evidence.

Zesty Paws’ expert’s survey didn’t address how consumers interpreted the #1 claims. Instead, the survey respondents saw an image of Nutramax’s Cosequin product and asked to specify “the brand name of the product, any other names the product goes by, and the manufacturer of the product.” In response, “86.8 percent of respondents identified Cosequin® as the brand name of the product,” and “10.1 percent of respondents indicated that Nutramax Labs was the brand of the product.” The main survey question asked, “Based on your review, what brand is this product? (Please be as specific as possible.)” That was less about whether respondents generally perceive NUTRAMAX to be a brand in its own right and more about whether respondents identify NUTRAMAX to be the most specific brand name of the particular Cosequin product package. Both ecommerce listings and the tamper-evident seal, not shown to respondents, referenced Nutramax.  “Even without these cues, 10.1 percent of respondents still identified NUTRAMAX as the brand for the Cosequin product. Zesty Paws’ own internal brand awareness studies from about 2020 through 2022 showed that NUTRAMAX frequently scored higher than ZESTY PAWS when respondents were presented with a list of brands that included both names.” Nor did Nutramax’s internal documents concerning a possible move to a COSEQUIN-centered branding strategy matter, because the strategy was never implemented.

Market research data that aggregated sales data under one “brand” per product were also unhelpful, since there can be several brands associated with a product, e.g., Frito Lay® Flamin’ Hot® Cheetos®.” In other words, that COSEQUIN is a brand does not mean that NUTRAMAX is not also a brand. Also, Zesty Paws suggested how one of the market research entities should make the brand comparison, encouraging it to reach out with any questions about “brand delineation” and stating, “As a reminder, please ensure all brands are evaluated at the consumer facing level (i.e. Dasuquin not Nutramax) ....” And an expert testified that “[t]here is nothing [about] Nielsen’s processes or motivations as a data seller that makes them an authority on what is and is not a brand.” They could be inaccurate and inconsistent, and they tracked only a small segment of the pet supplement market.

Thus, Nutramax would likely show literal falsity.

Materiality: Nutramax’s expert testimony satisfied its burden. One marketing expert testified that the effectiveness of various number one claims “has been studied for a long time by academic marketers and there is very consistent evidence that when you make a number one claim, you enhance the perceptions and the purchase of the claimed brand and you depress the perceptions and the purchase of the non-claimed brands.” He also testified that a number one claim in this case is “especially potent because ... we don’t actually get direct experience with these products and so we really have to rely on these claims even more than [we] would with a product like Coke or Pepsi where we get to taste it for ourselves.”

Injury: Likewise, the experts testified that this would likely harm Nutramax, both in the eyes of consumers and retailers: “[t]he belief that Zesty Paws is the market leader will likely lead retailers to give Zesty Paws more shelf space, more prominent shelf positioning and overall increased availability of Zesty Paws products.”

Irreparable harm was presumed and not rebutted by a five-month delay in bringing a preliminary injunction motion because “Nutramax first sent Zesty Paws a notice-of-dispute letter about the #1 Claims on July 17, 2023, shortly after learning of them. The parties then continued to exchange letters until they participated in an unsuccessful mediation on December 7, 2023. Zesty Paws commenced this action on December 13, 2023, and Nutramax filed its preliminary injunction motion on December 22, 2023.” That didn’t show any lack of worry about harm on Nutramax’s part.  

In addition, Nutramax’s experts specifically testified that, in the court’s words, “once a brand’s market leadership is lost, that loss is nearly always permanent along with the benefits brought by the market leadership position.” He stated: “[W]hat we find from the extensive literature is that consumers think more highly of number one brands, they perceive them to be higher quality, they are going to purchase them more frequently, [and] they’re willing to pay more for those products because of that associated higher quality.” Indeed, the court summarized, “the power of signaling market leadership is so strong that even when consumers misperceive a brand as a market leader, the misperceived brand still accrues all of the benefits of market leadership, particularly higher evaluations from consumers.” A second marketing expert testified that lost market share is difficult to regain due to habit, status quo and brand loyalty.

With that out of the way, a preliminary injunction was essentially inevitable.

Another challenge to "up to 8 hours of relief" proceeds

Sheiner v. Supervalu Inc., 2024 WL 2803030, No. 22 Civ. 10262 (NSR) (S.D.N.Y. May 28, 2024)

Supervalu sold a “Maximum Strength Lidocaine Patch” product which contained “topical anesthetic 4% Lidocaine” which “desensitize[s] aggravated nerves” to provide “temporary relief of pain” to the “back, neck, shoulders, knees, elbows” for “up to 8 Hours of relief.” Sheiner’s GBL claims challenged the “up to 8 hours numbing relief” claim, alleging that the patch “is unable to adhere to skin for more than four hours, often peeling off within minutes of light activity” and “did not reliably adhere to Plaintiff’s body for anywhere close to eight hours, which prevented it from providing even temporary pain relief,” also citing a study by the Journal of Pain Research.

Sheiner also challenged “Maximum Strength” because “prescription lidocaine patches exist on the market that deliver greater amounts of lidocaine to the user.” In addition, the package’s “compare to Salonpas® Lidocaine Patch active ingredient” instruction allegedly contributed to confusion because Supervalu’s product “contains roughly forty percent less lidocaine” than found in the Salonpas® OTC Lidocaine Patch product.

In addition, Steiner alleged that the phrase “numbing relief” implies the OTC Product provides relief associated with “medical treatments requiring a prescription and FDA approval,” implying that the product would “completely block and numb nerves and pain receptors, eliminate responses to painful stimuli, and can treat neuropathic and musculoskeletal pain, including back pain.”

Supervalu argued that courts have “recognized that ‘up to’ statements ‘are generally not construed as concrete promises about a product’s maximum yield.’ ” But it was “plausible to contend that the ‘Up to 8 Hours’ language on the label indicates the patch can provide pain relief for as long as eight hours, and the label says nothing about other factors relating to the patch that may result in a much shorter period of pain relief.” Compared to other situations, where self-evident or disclosed contextual factors (like the strength at which coffee is brewed affecting the number of cups that could be brewed from a given amount) informed consumers about whether they could expect to get the “up to” results, “the lidocaine patch labels at issue ‘include no identification of any factors that might limit the amount of time that the patch would remain adhered to the body and deliver relief.’ ”

The other alleged deceptions failed less well: “The argument that a consumer would expect an OTC product to be equivalent to the most powerful prescription medicine is a nonstarter.” A reasonable consumer “would plainly ‘understand that OTC products differ from products that are available with a prescription,’ ” and contain only the “maximum strength” dose available at the drug store. But 4% is the maximum lidocaine concentration allowed by law in OTC products, which this product had, and Steiner failed to identify an OTC lidocaine patch available on the market that is stronger. (The court distinguished cases reaching the opposite conclusion; they only made sense when an OTC drugmaker made a direct comparison to a prescription product.) Also, even if the FDA cautioned manufacturers not to use “Maximum Strength” claims, “the FDA’s regulations or views are irrelevant or at least not dispositive when it comes to determining whether a reasonable consumer would be deceived or misled under GBL §§ 349-50.”

Claims based on “numbing relief” also failed. The interpretation that it would completely block pain was unreasonable. The label explicitly limits its use to “temporary relief of pain,” and Steiner didn’t even allege that he believed that the product would completely block or eliminate pain. Breach of express warranty claims failed for want of timely, prelitigation notice.  

On fraud, the plaintiff failed to allege facts that give rise to a strong inference of fraudulent intent.

Second Circuit affirms rejection of "All Natural" survey as too leading

Bustamante v. KIND, LLC, 100 F.4th 419 (2d Cir. 2024)

The court of appeals affirmed summary judgment in favor of KIND on Bustamante’s false advertising consumer protection class action claims based on KIND’s “All Natural” labeling. The complaint alleged that eleven ingredients contained in some relevant KIND products were “non-natural”: Soy Lecithin; Soy Protein Isolate; Citrus Pectin; Glucose Syrup/“Non GMO” Glucose; Vegetable Glycerine; Palm Kernel Oil; Canola Oil; Ascorbic Acid; Vitamin A Acetate; D-Alpha Tocopheryl Acetate/Vitamin E; and Annatto.

Eventually, the district court excluded plaintiffs’ survey and scientific experts and granted summary judgment.

“To establish deception under the reasonable consumer standard at the summary judgment stage, plaintiffs must present admissible evidence establishing how the challenged statement – ‘All Natural’ – tends to mislead reasonable consumers acting reasonably.”

Although errors in survey methodology generally go only to weight rather than admissibility, it was not an abuse of discretion to exclude the survey expert here. The court found that the survey “does not assist the trier of fact because it is biased, leading, and to the extent it provides any insight, cannot provide the objective standard necessary to answer the key question in this case.”

The survey surveyed California, Florida, and New York consumers who had purchased KIND products, or products from a KIND competitor, in the last twelve months. Respondents saw “a mock-up of the front of a brand-neutral product package and [were instructed] to ‘examine it like you were shopping’ ” and “to assume that the nutrition snack bar is a ‘popular national brand.’ ” The mock-up label displayed the words “All Natural,” and in several respects resembled the packaging of a KIND bar.

The first relevant question asked: “Because of this descriptor [All Natural], what is your expectation for this product?” It offered three possible choices: (a) “Will NOT contain artificial and synthetic ingredients;” (b) “Will contain artificial and synthetic ingredients;” or (c) “Not sure/No expectation.” “86.4% of consumers expected the Product with the ‘All Natural’ claim ‘will NOT contain artificial and synthetic ingredients.’ ” The survey did not define the terms “artificial” or “synthetic.”

The district court found that this question didn’t help determine “in any meaningful sense how reasonable consumers understand the ‘All Natural’ claim, or to test plaintiffs’ theory.” It was “biased” and “lead[ing]” because it “improperly directs survey participants to the ‘correct’ answer” and “is plainly designed to validate plaintiffs’ theory” of liability. This characterization was not manifestly erroneous, especially because the expert conceded that he “worded [his] substantive response options on the basis of [his] understanding of the Plaintiffs’ theory of liability.” The Second Circuit has previously held that a plaintiff could not rely on a survey based on a question that, like this one, “was an obvious leading question in that it suggested its own answer.” (Citing Universal City Studios, Inc. v. Nintendo Co., 746 F.2d 112 (2d Cir. 1984), where the question was “To the best of your knowledge, was the Donkey Kong game made with the approval or under the authority of the people who produce the King Kong movies?” That’s a far more leading question; the sin here seems to have been that the question was closed-ended, even though it had a don’t know/not sure option. Would the Second Circuit be ok with starting with an open-ended question? With asking people whether “All Natural” means “no artificial/synthetic ingredients”? What else could you possibly ask to test plaintiffs’ theory of liability?)

The choice “to display the ‘All Natural’ claim in isolation, rather than as part of the ‘All Natural/Non GMO’ statement, as it always appeared on KIND labels” further undercut the relevance of the results.

The second question asked: “Because of this descriptor [All Natural], what is your expectation for this product?” The options were: (a) “Is NOT made using these chemicals: Phosphoric Acid, Hexane, Potassium Hydroxide, Ascorbic Acid”; (b) “Is made using these chemicals: Phosphoric Acid, Hexane, Potassium Hydroxide, Ascorbic Acid”; or (c) “Not sure/No expectation.” The survey didn’t describe or define these “chemicals” (court’s scare quotes). The results were similar: over 76% of respondents chose (a)

It was also not manifestly erroneous to find this irrelevant. By providing a list, the survey “led survey participants down the path of selecting the answer preferred by plaintiffs.” (Would it have been better to give them an actual ingredient list?) Also, by listing the “chemicals” without defining them, the survey failed to differentiate between “ascorbic acid,” a form of Vitamin C safe for human consumption, and “phosphoric acid,” which is “not safe for ingestion.”

Likewise, it was not an abuse of discretion to exclude the scientific expert because he wouldn’t assist in identifying what reasonable consumers considered artificial or synthetic. He developed a framework that “examined each ingredient’s origin, the extent to which the ingredient had been processed from its natural form, and the final form of the ingredient.” He opined on whether the ingredients could be classified as “natural” under his framework, but didn’t apply a definition used elsewhere, including in the complaint or by the survey. Nor did he specifically analyze KIND ingredients, only how they were “typically” sourced. “But, without some evidence to the contrary, there is no reason to assume that [the expert’s] personal understanding of the term ‘natural’ is relevant to how a reasonable consumer would understand that same term.” Because of that flaw, “the report adds no useful information that would help the trier of fact determine the answer to the relevant legal question: whether consumers were actually deceived.”

Without the expert evidence, summary judgment for KIND was appropriate. Named plaintiffs’ own testimony wasn’t enough because they didn’t provide a cohesive definition of what “All Natural” meant, whether it would mean “containing no artificial or synthetic ingredients, or what it means to be artificial or synthetic. Plaintiffs’ depositions instead showed how variable definitions of “All Natural” can be:

For example, one plaintiff testified that she expected “All Natural” to mean not synthetic. Another plaintiff testified that she expected “All Natural” to mean that the product was made from whole grains, nuts, and fruit. Yet another explained her belief that “All Natural” meant that the ingredients were literally plucked from the ground. Notably, several plaintiffs testified that consumers could have different understandings about the implications of the term “All Natural,” that these understandings could change over time, and that not everyone would agree with their particular understanding of that term. Plaintiffs fail to explain how a trier of fact could apply these shifting definitions to reach a conclusion as to whether the use of the term “All Natural” on KIND product labels was deceptive.

KIND’s own internal documents weren’t helpful because all they showed was that KIND had its own conception of the term, but didn’t show what a reasonable consumer’s understanding was. (Courts used to be more willing to say “the seller’s beliefs about what its audience wants are good circumstantial evidence, given the seller’s incentives,” and they still do in trademark cases.) The FDA’s own request for comments also demonstrated lots of varied understandings.

Nor was it enough for plaintiffs to use the dictionary. (That’s just for courts.) The definition identified, “existing in or caused by nature; not made or caused by humankind,” “is not useful when applied to a mass-produced snack bar wrapped in plastic. Such a bar is clearly made by humans.”