compounding pharmacies lose a round with Lilly on personalized medicine and GLP-1 comparison claims

Eli Lilly & Co. v. Mochi Health Corp., 2026 WL 1076831, No. 25-cv-03534-JSC (N.D. Cal. Apr. 20, 2026)

Eli Lilly’s claims were previously dismissed, and Lilly tried again with claims under California’s UCL, Lanham Act false advertising, and civil conspiracy. Civil conspiracy failed but Lilly was allowed to proceed with the advertising claims.

Lilly makes two FDA-approved weight-loss medications containing tirzepatide. “Mochi Health is a telehealth company that connects consumers with physicians who can prescribe weight-loss medications, including compounded versions of tirzepatide.”

Lilly’s first UCL claim arose from Mochi Health’s alleged corporate practice of medicine. It allegedly changed patient doses en masse without consulting patients or receiving a clinical indication from a physician—several times over the course of a year. The changes were allegedly based Mochi’s developing business relationships with various pharmacies: whether compounded medications included niacinamide, glycine, and pyridoxine depended on the pharmacy. Lilly alleged that these additives were not meant to achieve a therapeutic effect, but rather reflected Mochi’s financial considerations. Thus, Mochi allegedly made medical decisions for patients based on profit motives rather than clinical need. It also allegedly “steer[s] its patients to compounded products over Lilly’s FDA-approved tirzepatide medicines” through its hiring of Mochi physicians, its development of obesity treatment protocols, and training of Mochi medical staff.

Lanham Act: Lilly alleged that Mochi misrepresented its compounded tirzepatide medications as safe and effective based on studies conducted of Lilly’s products; misrepresented its products as FDA-approved; and misrepresented its tirzepatide drugs as “personalized.”

Along with lost sales, Lilly alleged reputational harm because Mochi compared an inferior, compounded product to Lilly’s FDA-approved medicine, causing consumers to conflate the higher incidence of adverse events found in compounded medications with Lilly’s drugs. Lilly cited studies indicating a higher risk of adverse events from utilizing compounded versions of tirzepatide, such as “abdominal pain, diarrhea, nausea, suicidality, and cholecystitis.”

Mochi once again challenged Article III standing. But this time Lilly successfully alleged both sales diversion and reputational harm. “Coupled with Mochi Health’s alleged unilateral ability to modify existing compounded medication doses for customers, Lilly asserts Mochi Health exercises control over the Mochi Medical practice to reduce patients’ ability to choose MOUNJARO® or ZEPBOUND® over a compounded option.” Its ads about the safety and personalization of compounded tirzepatide also plausibly steered consumers in the market for weight-loss medication away from Lilly’s products.

As for reputational injury, Lilly connected its allegation about higher side effects for compounded medications to research findings from the National Consumers League that show consumer confusion about the difference between compounded medications and FDA-approved medications, and conflation of the two. “Combined, these allegations permit a reasonable inference of harm to Lilly’s reputation through public perception that FDA-approved tirzepatide medications have similar rates of adverse side effects compared to compounded medications.”

Defendants argued that consumers of compounded tirzepatide were different from consumers of MOUNJARO or ZEPBOUND, relying on statements Lilly made in a separate case involving the FDA’s determination that there was no longer a nation-wide “shortage” of tirzepatide-based drugs, where Lilly said that “there were good reasons to think much of the market for compounded tirzepatide would not translate to future demand for Lilly’s FDA-approved products. Compounded products are often promoted for uses different from the indications FDA has approved, including by affiliated telehealth providers, so patients may be less likely to get a prescription from a physician for FDA-approved medicine. There also might not be insurance coverage for those off-label uses, and some compounded products use a different formulation than Lilly’s products.”

This didn’t estop Lilly from alleging harm here. Lilly did not make any claims about Mochi Health’s marketing and customer base. And its prior statement that “much of the market for compounded tirzepatide” may not overlap was consistent with its allegations in this case of some consumers being diverted.

Even though they operated in different market strata and Mochi doesn’t prescribe, manufacture, or sell the compounded tirzepatide medications, Lilly still plausibly alleged that misleading advertisements about the safety and personalization of Mochi’s medicines attracted customers in the market for weight-loss medication that may have otherwise purchased a Lilly medication and that Mochi patients were steered away from Lilly’s products. “It is not necessary that Mochi Health personally profited from the diverted sales; the relevant inquiry is whether Lilly has plausibly alleged it suffered an economic injury caused by Mochi Health’s conduct. Accordingly, Lilly’s and Mochi Health’s relative positions in the market are not dispositive of the economic injury question here.”

Mochi further argued that the causal chain was interrupted by the requirement that any consumer receive a valid prescription from a treating physician before purchasing compounded tirzepatide. But a single third-party’s actions do not necessarily upend traceability given the requirement is “less demanding than proximate causation.” And Lilly alleged that Mochi influenced the prescription process, including by changing the formulation of compounded tirzepatide medications for all patients en masse without advanced notice or a clinical indication. That was plausible traceability.

As for redressability, Mochi argued that an injunction could not force physicians—who are not parties to this case—to prescribe Lilly’s products instead of a compounded drug. But damages are available, and any equitable relief would redress Mochi’s alleged false advertising practices and corporate intervention in the practice of medicine.

UCL claim: Lilly plausibly alleged that it was injured as a result of the allegedly unlawful corporate practice of medicine. The California Medical Practice Act is violated if a “non-physician exercises ‘control or discretion’ over a medical practice.” And that was sufficiently alleged.

Lanham Act: Statutory standing was present both through sales diversion and reputational damage.

Indeed, Mochi Health allegedly deployed search-engine optimization to show Mochi Health’s compounded tirzepatide medication advertisements to consumers searching for Lilly products. Moreover, Mochi Health directly compares its own compounded medications to Lilly’s products in social media advertising. These allegations permit a reasonable inference that any alleged misrepresentations by Mochi Health put Lilly at a competitive disadvantage in the market—either by losing customers or suffering damage to its reputation. So, Lilly’s allegations permit a reasonable inference that any misrepresentation by Mochi Health proximately caused its injuries.

Reputational injury doesn’t require direct competition, and diverted sales also counted even without a supposed 1:1 relationship of lost sales. Lexmark found the 1:1 relationship important because “Lexmark’s anticompetitive actions primarily targeted remanufacturers, not [plaintiff] Static Control.” Here, Mochi allegedly operates in the weight-loss market by advertising directly to those consumers. “The relevant allegations here permit a plausible inference that any false or misleading statements issued by Mochi Health injured Lilly because they targeted the same segment of the market from which Lilly stood to profit.”

What about the intervening cause of a doctor’s prescription? Not intervening enough to defeat proximate cause. Eli Lilly & Co. v. Willow Health Servs., Inc., No. 2:25-CV-03570-AB-MAR, 2025 WL 2631620, at *6 (C.D. Cal. Aug. 29, 2025), found the prescriber’s conduct to defeat proximate cause. The court here disagreed. First, Lilly here alleged direct interference with patient prescriptions. “Second, drawing inferences in Lilly’s favor, that a medication requires a prescription does not prevent a consumer from relying on advertising to request one product over another from their physician. Since both products at issue contain tirzepatide, it is a reasonable inference that a consumer would have some basis for asking her physician to prescribe a specific medication.”

Falsity: Mochi allegedly misled consumers by (1) citing to Lilly’s clinical trials to support its claims and (2) advertising that “tirzepatide is a safe medication that has been approved by FDA.” The court agreed that these were plausibly misleading, accepting Lilly’s allegation that “the FDA does not approve an active pharmaceutical ingredient for treatment of patients, but rather approves specific formulations of that ingredient that have been subjected to rigorous study.” Mochi cited the Lilly studies to tout “tirzepatide,” then connected that to “compounded tirzepatide,” and didn’t mention the difference between compounded and FDA-approved formulations, but instead suggested the medicines were interchangeable.

Mochi argued that was a mere lack of substantiation theory. While some district courts have agreed, the court reasoned that it was plausible that Mochi’s statements misled consumers into believing that the Lilly studies actually considered compounded medication. “The issue is not whether Mochi Health had a basis for its statements, but rather, whether Mochi Health misrepresented the contents of the studies.” That’s a workable theory.

Likewise, Mochi’s statements could be reasonably understood to indicate that compounded tirzepatide medications are FDA-approved: “Tirzepatide is a safe medication that has been approved by the FDA” followed by a representation that Mochi’s compounded medication is “safe,” citing only the Lilly studies and the FDA approval of Lilly’s drugs.

“Personalized” medicine claims: Mochi offered “much more accessible alternatives to brand-name medications that are customized to the medical needs of the patient” and claimed that “[c]ompounded medications are custom-prepared to meet an individual patient’s specific needs.” But Lilly alleged that’s not what happened. If Mochi changes the formulation and dosage of its compounded medication en masse based on its business relationships with pharmacies, not medical indication, that would directly contradict the ad claims. Mochi’s interpretation that all it advertised was “customized” or “personalized” care plans was meritless.

Nor did the court apply FDCA preclusion. The “personalized” theory didn’t conflict with the FDCA’s regulatory scheme. Mochi argued that the FDCA allows compounding; that compounded medications are “personalized” by definition; and that Lilly’s theory contradicts a permissible practice of creating “batches of compounded medications for subsequent dispensing.” But Lilly’s falsity theory was about advertising that Mochi “personalized” medications but then did not tailor changes in dosage or formulation of the compounded drug to individual patients’ medical needs. “Whether Mochi Health or Aequita Pharmacy prepared the medication in “batches” is ultimately beside the point: the falsity derives from Lilly’s allegations that Mochi Health changed the formulation of patients’ medications based on business interests and evolving relationships with certain pharmacies rather than patient needs. Defendants have not identified any FDCA provision or FDA policy directly in conflict with this misrepresentation theory.”

What about safety claims: better left to the FDA? The court won’t have to determine the scientific validity of citing the Lilly studies to support safety claims about compounded medications. It would only have to determine whether Mochi misled consumers into believing that the Lilly studies tested the effects of compounded tirzepatide medications. “This misrepresentation theory presents a binary question of whether the studies considered any compounded tirzepatide formulation.” Nor would resolving the claim about misrepresentation of FDA approval impinge on the FDA’s policy choices. Defendants could renew their preclusion argument if discovery warranted it.

an impossible claim is literally false and actionable if believing it is reasonable

Panelli v. Target Corp., --- F.4th ----, 2026 WL 1042441, No. 24-6640 (9th Cir. Apr. 17, 2026)

Something that I don’t yet have a full handle on is happening in 9^th Circuit consumer protection cases around literal falsity v. ambiguity. It could be good, but I’m nervous about the potential for weird Lanham Act interactions since “literal falsity” and “ambiguity” sound like the Lanham Act concepts but currently have important differences. FWIW, the emerging consumer protection approach has some things going for it—and if Lanham Act cases started to recognize that consumer surveys shouldn’t rigidly be required in cases of “ambiguity,” that would be a very good thing indeed.

Anyway, Panelli alleged that Target sells some of its “100% cotton” bedsheets with claimed thread counts of 600 or greater, but that it is impossible to achieve that high of level of thread counts with 100% cotton textile. The court of appeals held that the district court erroneously concluded that Panelli could not be deceived as a matter of law by an impossible claim under the usual California consumer protection laws.

Panelli alleged that independent testing showed the sheets he purchased had a thread count of only 288—not 800, as claimed on the sheet’s label. Indeed, he alleged, “it is physically impossible for cotton threads to be fine enough to allow for 600 or more threads in a single square inch of 100% cotton fabric.” The district court relied on Moore v. Trader Joe’s Co., 4 F.4th 874 (9th Cir. 2021), a badly reasoned case holding, in this opinion’s words, that “a reasonable consumer would be dissuaded by contextual information from reaching an implausible interpretation of the claims on the front label of the challenged product.” If it was physically impossible to achieve 800 thread count, the district court reasoned, then no reasonable consumer would interpret the ad as promising an impossibility.

The court of appeals distinguished Moore because there, “100% New Zealand Manuka Honey” was ambiguous: it didn’t necessarily mean that the bees making the honey fed only on the manuka flower. (This is not the poorly reasoned part, which is the stuff the court says a reasonable consumer should know about honey grading and pricing.) As a result, “reasonable consumers would necessarily require more information before they could reasonably conclude Trader Joe’s label promised a honey that was 100% derived from a single, floral source.” And “(1) the impossibility of making a honey that is 100% derived from one floral source, (2) the low price of Trader Joe’s Manuka Honey, and (3) the presence of the ‘10+’ on the label [which apparently signifies a relatively low manuka content] … would quickly dissuade a reasonable consumer from the belief that Trader Joe’s Manuka Honey was derived from 100% Manuka flower nectar.”

Here, the district court “skipped a step by not analyzing whether the label was ambiguous and therefore required the reasonable consumer to account for outside information to interpret the label’s claim.” The challenged claim here was not ambiguous. It “purports to communicate an objective measurement of a physical aspect of the product.”

Target argued that there are multiple possible measures of thread count—but it doesn’t produce consumer protection law ambiguity, which asks only whether a substantial number of reasonable consumers could think their questions about the feature had been answered without further information, not whether all reasonable consumers would necessarily think that. Note that the multiple possible measures of thread count would produce Lanham Act ambiguity, if the non-false possibilities are reasonable. Here, “it is unlikely that a reasonable consumer would know there are multiple thread-counting methodologies.” Indeed, consumers are not “expected to look beyond misleading representations on the front of the box” to discover the truth of the representations being asserted, and are “likely to exhibit a low degree of care when purchasing low-priced, everyday items,” “like bed sheets sold by a mass-market retailer.”

A reasonable consumer is “unlikely to be familiar with the intricacies of textile manufacturing.” [Moore said that reasonable consumers know how honey is made; its error was to assume that knowledge “bees collect pollen” would somehow translate to “and therefore they’d likely collect lots of different kinds of pollen” when people generally don’t give that much thought to that kind of background information.] “Realistically, a reasonable consumer’s knowledge of textile manufacturing is likely limited to the fact that a higher thread count listed on packaging indicates a higher quality sheet.”

The court added: “Allegations of literal falsity are the most actionable variety of consumer protection claims on California’s spectrum of actionability.” True, some claims can be so clearly false as to avoid deception. But Panelli’s claims weren’t unreasonable or fanciful:

While a vast majority of consumers are, for instance, familiar with the biological nature of bees so that it would be unreasonable for a consumer to think honey was sourced from a single type of flower, they likely would not have that same kind of baseline knowledge about textile manufacturing. Neither common knowledge nor common sense would cause a Target shopper to question the veracity of the claim on the bed sheet’s label that the product was of 800 thread count.

The court declined to create a situation where “manufacturers would face no liability for false advertising so long as the claims were wholly false—regardless of whether this falsity is generally knowable to consumers.”

drug makers face rocky road in making claims against sellers of compounded weight loss drugs

Three different cases reading Lexmark differently but mostly kicking out claims:

Eli Lilly & Co. v. Aios, Inc., 2026 WL 836624, No. 25-cv-03535-HSG (N.D. Cal. Mar. 26, 2026)

Eli Lilly sells Mounjaro and Zepbound, GLP-1 inhibitors containing tirzepatide. These are the only FDA-approved medicines containing tirzepatide in the United States, and the FDA has not approved any tirzepatide product in oral or compounded form.

Defendant operates telehealth platforms focusing on drugs for weight loss, including compounded tirzepatide. Eli Lilly alleged that its Fella telehealth platform engaged in the unlicensed practice of medicine: For example, the non-physician founder allegedly “frequently tells customers that he can help increase their dosage amounts of Fella’s knockoff drugs if they contact him or his non-physician customer success team directly.” Fella also allegedly changed patient prescriptions “en masse,” based on Fella’s business needs, rather than individualized patient needs. Many patients allegedly learned that their prescription now contained an additive “not through their doctor but rather when their prescription arrived from Fella Health.” Eli Lilly alleged that these weren’t “personalized prescriptions”—rather, Fella is offering “an untested, unapproved, one-size-fits-all drug” to patients without complying with the California Medical Practice Act’s requirement that prescriptions be made with “an appropriate prior examination and a medical indication.”

Eli Lilly also alleged deceptive conduct with claims such as “[o]ur science-backed methodology delivers results that outperform traditional weight loss methods”; “[o]ral tirzepatide is the same active ingredient as the compounded injectable (tirzepatide)”; and “[o]ur advanced oral Tirzepatide treatment, developed through cutting-edge research, offers a safe and effective solution tailored to support your weight loss journey and overall health.”

Eli Lilly alleged that Fella knew these statements were false. In a Reddit post, Fella’s Head of Customer Sales wrote that “oral [tirzepatide] can be fairly ineffective (though not totally ineffective), and some may experience more GI discomfort due to daily administration.” One of Fella’s customer success leads wrote that “[t]he oral version is less effective than the injectables, but it’s still better than not being on the medication at all.” Fella’s founder wrote on Reddit that “oral [tirzepatide] is slightly less effective than subcutaneous.”

But Fella’s website states that oral tirzepatide is “science-backed” and that Fella uses a “science-backed methodology,” while its Head of Customer Sales wrote that patients generally lose 15% of their body weight in one year on oral tirzepatide. Eli Lilly alleged that oral tirzepatide has never been studied in clinical trials and that Fella has no science at all supporting its oral product. The statistic cited by Fella on its female-targeted Delilah website, that patients using oral tirzepatide experience a weight loss average of “22.5%,” was derived from Eli Lilly’s clinical trial on injectable tirzepatide, not oral or compounded tirzepatide.

Eli Lilly sued for violations of the UCL, FAL, and Lanham Act, along with civil conspiracy.

Fella argued that Lilly lacked standing because they weren’t competitors and Eli Lilly couldn’t allege “something very close to a 1:1 relationship between [Eli Lilly’s] lost sales and the sales diverted to a defendant.” The court disagreed: Lexmark directed the court to use the zone of interests test and proximate cause, both of which Lilly properly alleged.

Lilly alleged that “Fella’s unfair, deceptive, misleading, and false practices, including its false and misleading statements, cause irreparable harm to Lilly’s brand and customer goodwill by promising results that consumers cannot obtain from Fella’s product,” and, because Fella relied on Lilly’s studies on its product, consumers would also think that Lilly’s product would be that bad. Plus, Lilly alleged injury to its commercial interest in sales. E.g., on Reddit, one of Fella’s customers said he “was on zepbound” until mid-November 2024, but “stopped” when the medicine became too expensive and eventually switched to Fella. Lilly also had standing under the UCL and FAL, but only as to false advertising, not to the UCL claim based on allegedly unlawful corporate practice of medicine. “Eli Lilly does not plausibly allege how Defendants’ claimed lack of authorization to practice in itself causes it any injury.”

Commercial advertising or promotion: It was plausible that the Reddit posts were made for the purpose of influencing customers to buy Fella’s products. Although this was a closer question than statements on Fella’s own website, the Reddit statements “tout Fella’s success with statistics, refer to Fella’s oral and injectable tirzepatide products, and adequately reflect an economic motivation, such that the allegations support a reasonable inference that ‘the economic benefit was the primary purpose for speaking.’”

However, Lilly struggled with its literal falsity arguments, since “lack of substantiation” is not itself a valid theory under state or federal law. For example, Lilly alleged that Fella’s statements regarding its patients typically losing 15-22.5% of their body weight were false because those statements are in reality based on the results of Eli Lilly’s clinical trials, which were performed on injectable and non-compounded tirzepatide. And it’s true that a plaintiff can show falsity by showing that even reliable tests do not establish the proposition asserted by the defendant. “But here, Eli Lilly has not alleged that Fella made any representation regarding the specific basis for its statements about the weight loss results typically achieved for its patients, and Eli Lilly does not allege any contrary facts (as opposed to the purported lack of supporting facts).” Lilly didn’t plausibly allege that Fella’s statements about the existence of rigorous “research” and “testing” were false just because oral tirzepatide has never been subject to the particular mechanism of a clinical trial or study. [Seems like a consumer survey should be relatively easy to do to find deceptiveness even if not literal falsity.]

The only allegedly false statements sufficiently pled were those made in connection with Fella’s promotion of “personalized treatment plans.” Whether defendants actually personalize customers’ treatment was capable of being proven true or false, not puffery.

Novo Nordisk A/S v. Amble Health, Inc., No. 4:25-CV-01048, 2026 WL 776100 (N.D. Ohio Mar. 19, 2026)

The parties allegedly are competitors in the sale of drug products containing semaglutide. Novo Nordisk sells the only FDA-approved medicines containing semaglutide in the United States, Amble is a telehealth company that sells drugs purportedly containing semaglutide, produced at compounding facilities. Novo Nordisk alleged that these compounded drug products are mass produced and create a higher risk to patients than Novo Nordisk’s medicines, because the FDA does not conduct pre-market reviews of compounded drugs for safety, quality, or effectiveness.

The complaint also alleged that Amble’s ads falsely claims that its drugs are personalized: “tailored to you,” and are “tailored to your personal goals,” with “personalization” of “active ingredients, dosage, and form of a medication to meet an individual’s personal needs.” The complaint alleged that, to the contrary, the compounded drugs were “ordered in bulk and sold to patients off the shelf.”

The court found that Novo Nordisk didn’t plausibly allege injury in fact. The complaint alleged sales diversion as well as reputational harm because compounded drugs might “undermine the reputation for quality and safety established on Novo Nordisk’s FDA-approved medicines.”

But defendants’ use of “personalized” didn’t plausibly threaten to harm Novo Nordisk’s reputation. “At base, [Plaintiff] appears to argue the mere fact a medication is compounded makes it an inferior version of an FDA-approved product with the same active pharmaceutical ingredients. But compounding is a federally recognized and regulated pharmaceutical practice ….” Novo Nordisk needed at least facts supporting an inference that Amble’s compounded medication fails to meet consumer expectations, which it didn’t. Nor did it plausibly allege that any of Amble’s customers were harmed by the compounded medication “such that they could draw unwarranted conclusions about the safety and efficacy” of Novo Nordisk’s drugs.  Although Novo Nordisk pled that “the FDA has received reports of adverse events, some requiring hospitalization related to overdoses from dosing errors associated with compounded ‘semaglutide’ products,” dosing errors don’t show that the term “personalized” in and of itself has led to any patient diversion. [The court is weirdly going back and forth between reputation and sales diversion.]

Even with Article III standing, Novo Nordisk didn’t properly allege statutory standing via the proximate cause element: The “personalized” message didn’t plausibly cause the harm. Compounded medications require prescriptions, and the physician’s prescribing decision, not the ads, was the proximate cause of the patient using the compounded medication instead of Novo Nordisk’s product.

Eli Lilly & Co. v. Willow Health Services, Inc., No.: 2:25–cv–03570–AB–MAR, 2026 WL 639976 (C.D. Cal. Feb. 3, 2026)

Eli Lilly alleged its medicines are backed by rigorous science and quality controls. It has FDA approval for two injectable tirzepatide-based medicines. At the time of the complaint, there was no FDA-approved oral tirzepatide. Willow operates a telehealth platform that markets and sells weight-loss treatments directly to consumers. Willow offers compounded tirzepatide products, including an injectable formulation and an oral formulation.

The FDA allegedly has expressed particular concern about compounded GLP-1 drugs, many of whose components are manufactured by facilities that are not subject to the same regulatory oversight as domestic manufacturers. It has warned about dosing errors, adverse events, and the use of unapproved salt forms in compounded tirzepatide products. 

Willow allegedly marketed its products as clinically validated and comparable to, or superior to, Lilly’s FDA-approved medicines: that its tirzepatide treatment has undergone “extensive testing,” is supported by “science,” and produces significant weight loss outcomes. Imagery of physicians and references to board-certified doctors allegedly reinforced the impression of medical endorsement.

Willow also allegedly claimed that its product is a “premium” blend that delivers “better results” than tirzepatide generally. Then it reiterates that its medication undergoes extensive testing. Lilly alleged that, in fact, Willow has no clinical studies supporting these claims, and no testing has been conducted on Willow’s compounded products to demonstrate safety or effectiveness. 

Willow allegedly marketed its drops as effective and, at times, superior to injections, but no clinical data supported the effectiveness of any oral tirzepatide product.

And Willow allegedly misrepresented that its medications were custom, “personalized,” and tailored to each patient’s unique needs, rather than standardized formulations delivered to all patients. Willow’s intake questionnaire “purports to assess whether Willow’s treatment is appropriate” but recommends its medication to all users regardless of the information provided.

After Lilly sued, Willow added a disclaimer to its website stating that its products are not FDA-approved and have not undergone clinical trials, but Lilly alleged that this bottom-of-page statement didn’t affect the overall message. Lilly also alleged that survey conducted by the National Consumers League found that many consumers incorrectly believe  thatcompounded GLP-1 drugs are FDA-approved and clinically tested. Willow’s advertising allegedly mirrored the types of statements the FDA has identified as false and misleading in warning letters sent to compounders and telehealth companies: “clinically proven,” “backed by extensive clinical research,” and “personalized.”

Lilly alleged that Willow’s marketing falsely equates its untested compounded products with FDA-approved medicines, diverting sales and harming Lilly’s reputation. It further alleged that adverse events associated with compounded tirzepatide products are often mistakenly attributed to Lilly’s medicines, further damaging its goodwill.

Statutory standing: “[T]he test forecloses suit only when a plaintiff’s interests are so marginally related to or inconsistent with the purposes implicit in the statute that it cannot reasonably be assumed that Congress authorized the plaintiff to sue.”

“If the plaintiff can demonstrate that the defendant is a direct competitor, there is a presumption of a commercial injury to plaintiff sufficient to establish standing.” Willow argued that wasn’t a direct competitor of Lilly evidenced by the fact that Lilly didn’t have direct evidence of lost sales and it actually had an increase in sales of Mounjaro and Zepbound. Lilly argued that the presumption of commercial injury conferred by direct competition couldn’t be rebutted. [Gotta say, that seems correct for the motion to dismiss stage.]

The court recognized “a split of authority in the Ninth Circuit on whether a presumption of commercial injury arising from direct competition is sufficient on its own to establish standing, or whether a plaintiff must also allege concrete facts demonstrating lost or diverted sales.”

Lilly alleged that Willow’s conduct “results in potential patients being lured away” and that “Willow[’s] ... materially false statements ... influence consumers’ ... decision to purchase Willow’s [drugs] instead of Lilly’s FDA-approved medicines.” Lilly also alleged that the products compete at “similar prices” causing consumers make purchasing decisions “based on factors other than pricing, including comparative safety and effectiveness.” These allegations, together with the presumption arising from direct competition, were sufficient to plead commercial injury.

What about proximate cause? A plaintiff “ordinarily must show economic or reputational injury flowing directly from the deception wrought by the defendant’s advertising; and that that occurs when deception of consumers causes them to withhold trade from the plaintiff.” Proximate causation may be adequately alleged when “there is likely to be something very close to a 1:1 relationship between” a plaintiff’s lost sales and the sales diverted to a defendant.

The court seems to read this Lexmark quote as a requirement rather than an example. But if I plausibly allege that my competitor & I would likely have split the sales garnered by a competing false advertiser, it’s got to be the case that I have standing. It’s not the 1:1 relationship that creates proximate causation but that, although the parties are at distinct parts of the value chain (as the parties were in Lexmark), a 1:1 sales relationship can justify finding proximate causation—a legal rather than factual conclusion—at a greater competitive distance than a more unbalanced/hard-to-prove loss ratio would have.

Reading Lexmark that restrictively, Lilly still failed to plead “a direct causal link between any advertisement by Willow and a patient choosing a compounded medication over Lilly’s product.” “Critically, regardless of advertising or patient intent, obtaining a prescription medication requires a physician to prescribe it. The physician’s prescribing decision, not Willow’s advertisements, is the proximate cause of the patient using the compounded medication instead of Lilly’s product.”

Lilly objected in vain that this ruling would categorically eliminate Lanham Act claims for prescription drugs. You still need “allegations showing a direct link between advertising and lost sales,” taking into account “the fact that prescriptions, a foreseeable and legally required step, determine whether a patient can actually obtain the product.” [Honestly, I’m not sure how hard this would be for Lilly to plead. The whole point of these services is that they contract with doctors to prescribe exactly what the services offer. A patient who contacts a doctor through one of these services is extremely likely to end up with their products. I don’t think Lilly should have to plead it, but it seems very plausible.]

Cal. anti-SLAPP law protects trailer for show that allegedly promised more fight than it delivered

Camper v. Paramount Global, 2026 WL 836249, No. B339150 (Cal. Ct. App. Mar. 26, 2026)

Camper “viewed a trailer for the reality television show College Hill: Celebrity Edition, which referenced, but did not show, a physical altercation between two cast members.” Camper alleged that he was misled by the trailer and other promotional materials to believe the show would include the full altercation and therefore paid for a subscription to the online streaming service BET Plus. When the show did not include any additional footage of the altercation, he sued for false advertising and related claims.

The trial court granted Paramount’s anti-SLAPP motion to strike.

Camper alleged that the trailer showed an argument between two of the show’s stars about racial identity, then showed one getting up to confront the other, then cut to other cast members yelling. Based on the trailer, “media interviews regarding the season, and a circulated screenshot of a physical fight released by” respondents, Camper allegedly bought a subscription to BET Plus so he could watch College Hill. At the moment of the fight, the show displayed the following message, “Out of respect for all parties involved, we have chosen not to show this fight.”

Paramount denied releasing the screenshot presented by Camper, or “any other screenshot depicting a physical altercation” between the cast members, “as part of an official marketing campaign or for any other purpose.” It also argued that it did not exercise any control over the interview given by a cast during which she discussed the fight, since by the time the interview was recorded, she had been expelled from college and had left the cast of College Hill.

The trial court concluded that the television program and associated promotional activities constituted protected speech in connection with an issue of public interest, as the episode involved “discussions of issues regarding race and racial identity, and the physical fight that is at the center of [Camper’s] claim arose out of a dispute on that topic.” Camper’s claims under the UCL, FAL, and CLRA failed because he could not establish that “it is probable that a significant portion of the general consuming public or targeted consumers could be misled by the trailer.” The court found that the physical altercation “was depicted in the episode, with a level of graphic detail that was greater than that in the trailer,” including that it showed an “opening swing” by one cast member, followed by “an extended segment of violent and disturbing audio that leaves no doubt that a physical fight is occurring,” as well as “audio of other classmates’ reactions during and after the event.” The trial court found that the scene “is much more dramatic than what is shown in the trailer, and nothing that is in the trailer is left out of the scene.” The court further noted that “there is nothing in the trailer that indicates how the fight would actually be depicted in the episode.”  

The court of appeals agreed. Camper argued that the trial court should have applied an exception for commercial speech, but the anti-SLAPP law carves out an exception from the commercial speech exception when an action is “based upon the creation, dissemination, exhibition, advertisement, or other similar promotion of any dramatic, literary, musical, political, or artistic work, including, but not limited to, a motion picture or television program.”

Camper had no evidence that a significant portion of reasonable consumers viewing the College Hill trailer could be misled to believe that the show would include additional footage of the physical fight. Declarations from Camper and one other viewer regarding their expectations were insufficient, especially since all of the footage in the trailer related to the fight was shown during the episode, as well as audio recordings capturing the fight and onlookers’ reactions to it. (Nor did he show causation given that he subscribed before the cast member interview.)

paying a late-disclosed "drip pricing" fee suffices as injury under Cal's new law

Chowning v. Tyler Tech., Inc., 2025 WL 3496690, No. 4:25-CV-04009-YGR (N.D. Cal. Dec. 5, 2025)

One of the first “drip pricing” cases I’ve seen under California’s new law, which the court reads to enable certain claims over and above previous law.

The California Department of Parks and Recreation awarded Tyler a 10-year contract to design and operate ReserveCalifornia.com, a website that enables online booking for campsites located in California State Parks.

Reserve California charges campers a campsite fee and a $8.25 reservation fee. In exchange for Tyler’s services, DPR “agreed to compensate [Tyler with] the eligible reservation-based transaction fees.” The contract requires DPR to approve any service and reservation fee that Tyler charges and requires Tyler to comply with federal and California laws and regulations in designing, operating, and otherwise performing any services related to Reserve California.

Plaintiffs alleged that the $8.25 reservation fee that Tyler charges is not included in “the initial price displayed to consumers” and is not disclosed “until the final check-out screens.” Although Tyler disputed this, arguing weakly that it discloses the reservation fee under the “Show More” link related to unit details, amenities, and other remarks regarding the selected campsite, “[a] website is not judicially noticeable, nor does the Court resolve factual disputes on a motion to dismiss.” Note: even if the court did consider this, it shouldn’t matter— “Show More” is a classic example of an uninformative, useless disclosure that wouldn’t allow consumers to understand that additional fees are being added. In the screenshots below, the fee is only mentioned at step 3 (checkout page 1), and the true full price of the reservation is shown at step 4 (checkout page 2).

step 1: "starting at" price doesn't include fee

step 2: specific choice doesn't show fee

step 3: fee mentioned in middle of text, no indication of total

step 4: the actual price!

The plaintiffs brought the usual statutory California claims and also alleged unjust enrichment.

The 2023 Honest Pricing Act prohibits certain deceptive advertising tactics, including “drip pricing,” where a firm advertises the product’s base price and later reveals other mandatory fees. It added the following provision to the CLRA:

(a) The unfair methods of competition and unfair or deceptive acts or practices listed in this subdivision undertaken by any person in a transaction intended to result or that results in the sale or lease of goods or services to any consumer are unlawful:

...

(29) (A) advertising, displaying, or offering a price for a good or service that does not include all mandatory fees or charges other than either of the following:

(i) Taxes or fees imposed by a government on the transaction.

(ii) Postage or carriage charges that will be reasonably and actually incurred to ship the physical good to the consumer....

Tyler argued that plaintiffs couldn’t show causation or harm, because they paid the final price knowing what it was.  The court noted that “the legislature’s decision to prohibit a particular misleading advertising practice is evidence that the legislature has deemed that the practice constitutes a ‘material’ misrepresentation, and courts must defer to that determination.” The complaint alleged that, “had [plaintiffs] known the true nature of the Junk Fee ... [they] would have attempted to pay in person directly to [the California state park].” That sufficed for materiality, which itself suffices for the elements of reliance and causation.

“At this early stage of litigation, it would be inappropriate for the Court to hypothesize about the availability of alternatives or other factual circumstances surrounding the transaction.” Plus, the court declined to create a Catch-22: “any consumer seeking to enforce the new CLRA provision could either purchase the product (despite the fee disclosure, which, according to defendant would strip a plaintiff of standing due to a lack of causation) or decline the purchase (meaning the plaintiff was not damaged, and therefore did not have standing).” Quoting a previous decision: “Surely the Legislature did not pass a law with no practical effect—especially given the overarching purpose of the CLRA.”

This also resolved questions about what constituted damage: “A plaintiff is injured when they pay for an unlawful fee in the context of drip pricing,” whether or not they knew the full amount they were paying. “While the Court agrees that Tyler is not required to disclose to whom the reservation fee is paid, Tyler’s argument does not address its alleged failure to disclose the complete price, including the reservation fee, in the first instance.”

For the CLRA claim, Tyler argued that: (1) campsite reservations are neither “goods” nor “services” for purposes of the statute; and (2) the reservation fee is exempt because it is a tax or fee that the government imposes. The court rejected both arguments. In evaluating whether the challenged conduct is a good or service, a court must follow the statutory requirement that the CLRA shall be “liberally construed and applied to promote its underlying purposes, which are to protect consumers against unfair and deceptive business practices and to provide efficient and economical procedures to secure such protection.”

A campsite reservation isn’t a good, but it is a “service,” given that the Honest Pricing Act was “designed to prohibit drip pricing in all industries,” which, as the California Legislature explained, includes “short-term rentals, [and] hotels.” If a hotel reservation is a service, so is a campsite reservation. The court distinguished cases about entrance tickets and limited-time licenses to stream a film or TV show.

The fee was also not a “[t]ax[ ] or fee[ ] imposed by a government on the transaction” under the law’s exemption. Any exception to the CLRA (and the other California laws) should be construed narrowly. It wasn’t enough that DPR permits contractors to charge fees and requires DPR approval of those fees. The “airport use fees, hotel taxes, tourism board fees, [and] wheelchair accessible vehicle fees imposed on Lyft and Uber by the Public Utilities Commission” identified by Tyler were “fees collected by a private company but that are passed to and retained by the government.” By contrast, the complaint alleged that Tyler retained the fees at issue. “Whether DPR set and ordered the reservation fee is a factual dispute that the Court will not resolve on a motion to dismiss.”

However, the court dismissed the unjust enrichment claim for failure to allege that Tyler received a benefit through “mistake, fraud, coercion, or request.” Plaintiffs challenged only the advertising, not the fee itself.

California's Made in the USA safe harbors aren't preempted by federal law

McCoy v. McCormick & Co., 2025 WL 1918546, No. 1:25-cv-00231-JLT-SAB (E.D. Cal. Jul. 11, 2025) (R&R)

McCoy alleged that French’s mustard bottles were falsely advertised with the claim “Crafted and Bottled in Springfield, MO, USA,” appearing at times with “American flavor in a bottle,” because the product contains foreign-made components. The magistrate recommended granting the motion with leave to amend. Interesting dive into the “Made in the USA” waters.

Specifically, McCoy alleged that the primary substantive ingredient is mustard seed, which is sourced primarily, if not exclusively, from Canada. Some varieties, including French’s Yellow Mustard, allegedly contain turmeric, another imported ingredient.

McCormick argued that California’s statutory safe harbors for “Made in the U.S.A.” protected it against McCoy’s California claims (including state law claims). McCoy argued that California’s safe harbor provisions are preempted by federal law—a conclusion rejected by the court. But he also argued that he alleged that a substantial portion of McCormick’s products exceeded California’s safe harbor levels.

The FTCA provides:

To the extent any person introduces, delivers for introduction, sells, advertises, or offers for sale in commerce a product with a ‘Made in the U.S.A.’ or ‘Made in America’ label, or the equivalent thereof, in order to represent that such product was in whole or substantial part of domestic origin, such label shall be consistent with decisions and orders of the Federal Trade Commission issued pursuant to section 45 of this title.

The FTC’s resulting Rule states:

[I]t is an unfair or deceptive act or practice...to label any product as Made in the United States6 unless the final assembly or processing of the product occurs in the United States, all significant processing that goes into the product occurs in the United States, and all or virtually all ingredients or components of the product are made and sourced in the United States.

16 C.F.R. § 323.2 (emphasis added).

California law also makes it unlawful to sell products as “Made in U.S.A.,” or other similar words, if the product or “any article, unit, or part thereof, has been entirely or substantially made, manufactured, or produced outside of the United States.” However, under California law, a product may be lawfully labeled as “Made in the U.S.A.” if no more than five percent of the final wholesale value of the manufactured product is obtained from outside the United States, or if no more than ten percent of the of the final wholesale value of the manufactured product is obtained from outside the United States and the manufacturer shows that it can neither produce the foreign article, unit, or part within the United States nor obtain the foreign article, unit, or part of the merchandise from a domestic source.

The FTC’s Rule provides that “this part shall not be construed as superseding, altering, or affecting any other State statute...relating to country-of-origin labeling requirements, except to the extent that such statute...is inconsistent with the provisions of this part, and then only to the extent of the inconsistency.” There is clearly not field preemption, and the judge was not persuaded that California’s safe harbor provisions were inconsistent with the FTC’s “all or virtually all” standard. The disjunctive standard of “all or virtually all” “necessarily means the FTC contemplates that a small amount of foreign content may be present to lawfully label a product as Made in the U.S.A.” The FTC has expressly declined to adopt a definition of “all or virtually all” because “adding further specificity also increases the risk the rule would chill certain non-deceptive claims.” Instead, it says that its rule requires a “de minimis, or negligible, amount of foreign content.” There was certainly no rule that a product containing foreign materials that make up less than 90-95% of a product’s wholesale value qualifies as more than a “de minimis, or negligible, amount of foreign content.” The legislative notes for the state safe harbor specifically referenced the FTC’s Rule, and the FTC, while it declined to adopt percentage thresholds because the “ ‘all or virtually all’ standard is better tailored to prevent unqualified U.S.-origin claims that will mislead consumers in making purchasing decisions,” it didn’t suggest that California’s safe harbors were, in every instance, inconsistent with the “all or virtually all” standard. Nor was it inherently inconsistent with the FTC Rule to rely on “final wholesale value,” since the FTC considered that one of the often-relevant factors in determining whether foreign content was de minimis.

Thus, there was neither express nor conflict preemption. And McCoy failed to plead facts showing that his claims weren’t barred by the safe harbor provisions, but the magistrate judge recommended that he should get a chance to fix that. It wasn’t enough that mustard seed was the third ingredient by weight, since that didn’t show final wholesale value in a product with six or more ingredients.

 

P&G's primary jurisdiction argument over tampon labels goes down like a lead balloon

Barton v. Procter & Gamble Co., 766 F.Supp.3d 1045 (S.D. Cal. 2025)

Plaintiffs alleged that P&G’s Tampax Pearl and Radiant tampons had dangerous levels of lead; the court allowed some of the usual California claims to proceed, including for injunctive relief.

There’s no safe level of lead exposure, and it’s “particularly harmful to young children and women of child-bearing age.” California’s Proposition 65 establishes a Maximum Allowable Dose Level of 0.5 micrograms of lead per day for reproductive toxicity. Based on “independent scientific testing and analysis,” the ordinary and expected use of the tampons would allegedly expose consumers to more than this MADL per day. Plaintiffs alleged that their independent laboratory testing of the super versions shows that Tampax Pearl Products contain .181 micrograms of lead per gram, and that Tampax Radiant Products contain .123 micrograms of lead per gram; extrapolating to light and regular, consumers would allegedly be exposed to lead in excess of the MADL regardless of which type they used.  Plaintiffs alleged that vaginal insertion allowed lead to be directly absorbed into the bloodstream, making this exposure particularly bad.

The package statements “#1 U.S. GYNECOLOGIST RECOMMENDED TAMPON BRAND”; “FREE OF PERFUME”; “FREE OF ELEMENTAL CHLORINE BLEACHING”; “TAMPON FREE OF DYES”; and “CLINICALLY TESTED GENTLE TO SKIN” allegedly mislead reasonable consumers to believe that the tampons are safe to use, including that “they are free from potentially harmful elements and ingredients.”

The court rejected the application of the primary jurisdiction doctrine. A 2024 study finding “measurable concentrations” of lead “in 30 tampons produced by 14 tampon brand manufacturers,” which concluded that “[f]uture research is necessary to replicate our findings and determine whether metals can leach out of tampons and cross the vaginal epithelium into systemic circulation.” “In response, on September 10, 2024, the FDA announced that it commissioned an independent literature review and initiated an internal bench laboratory study to determine if metals from tampons are released and if they are absorbed by the body.” The completed literature review “did not identify safety concerns associated with tampon use and contaminant exposure.” Despite the “limitations related to the methods used in the [reviewed] studies” and the fact that none of the studies actually addressed “how much, if any, of the contaminants identified are released from the tampon or absorbed through the vagina,” the FDA stated that it “continues to recommend FDA-cleared tampons as a safe option for use as a menstrual product.”

“Although the FDA has a history of regulating tampons, the primary jurisdiction doctrine does not ‘require[ ] that all claims within an agency’s purview ... be decided by the agency.’” “ The FDA’s literature review did not, and the FDA’s laboratory study will not, review affirmative representations such as those on the Product packaging and determine whether they were misleading when Defendant omitted the presence of lead in the tampons.” And, as to the fraudulent omission of an unreasonable safety risk allegations, the underlying questions of whether lead is released from tampons, enters the circulatory system, and creates an unreasonable safety risk are within the jurisdiction of the FDA, but there was no indication that the FDA was going to provide an opinion on any particular tampon, and staying the case would cause a delay. The FDA provided no timeline for releasing its findings after peer review. (And, honestly, even a functioning FDA takes years; does anyone believe that’s what we have?) “[P]rimary jurisdiction is not required when a referral to the agency would significantly postpone a ruling that a court is otherwise competent to make.”

However, the court found that the complaint lacked sufficient detail as to the laboratory that performed the testing or the form and date of testing. (I remain baffled by why this is important at the pleading stage.) Also, plaintiffs needed either to test the light and regular products or explain why extrapolation was appropriate, given that a different sub-brand of Tampax, pure cotton, didn’t have detectable levels of lead. (Maybe because it’s made differently?) Leave to amend was granted.

The court also denied P&G’s argument that the complaint was an impermissible attempt to bring a “back-door Proposition 65 claim.” Under Proposition 65, no person doing business shall “knowingly and intentionally expose any individual to a chemical known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individual” where the amount exceeds the “no significant risk level” established by the California Environmental Protection Agency’s Office of Environmental Health Hazard Assessment. Private parties can enforce Proposition 65, but only 60 days after they give “notice of an alleged violation” to the “alleged violator,” the California Attorney General, and local prosecutors. The notice must also include a “certificate of merit” that states that the “person executing the certificate has consulted with one or more persons with relevant and appropriate experience or expertise ... and that, based on that information, the person executing the certificate believes there is a reasonable and meritorious case for the private action.” Pre-filing notice is mandatory, and defective notice cannot be cured retroactively. A plaintiff cannot skirt these requirements by bringing claims – under consumer protection statutes – that would otherwise “be barred under Proposition 65.”

But the complaint here wasn’t entirely derivative of the unspoken Proposition 65 violation (failure-to-warn of lead). Plaintiffs alleged that P&G “has gone beyond the offenses of omission that Proposition 65 seeks to prevent and has affirmatively deceived its customers.”

Here, representations like “GYNECOLOGIST RECOMMENDED,” “FREE OF ELEMENTAL CHLORINE BLEACHING,” and “CLINICALLY TESTED GENTLE TO SKIN” were sufficiently “conceptually related” to the idea that the tampons are free from harmful substances, like lead. By contrast, statements on chocolate products such as “always small farmer grown” would not lead reasonable consumers to believe that the chocolate didn’t contain unsafe levels of toxins, because the connection between being locally grown and being free from toxins is attenuated. Here, safety- and additive- related representations more plausibly suggested the absence of lead.

However, material omission claims failed. Plaintiffs didn’t sufficiently allege that the presence of lead amounts to an unreasonable safety hazard. There was no allegation that the tampons even release lead, and the court thought that the allegations that they would “contradicted” the June 2024 study, although it looked to me like the study just said that it didn’t investigate that question itself, which is not a contradiction.  Even if the tampons released lead at the levels alleged, plaintiffs still failed to allege that the lead was “unreasonably hazardous at the particular levels in the specific Products.”

Equitable claims: Although plaintiffs could plead inadequate legal remedies in the alternative to seek disgorgement/restitution, they hadn’t done so (again, there was leave to amend). However, they had pled that legal remedies were inadequate as to prospective injunctive relief.  An injunction wouldn’t necessarily require P&G to change the product composition; it could require a disclosure. Plaintiffs properly alleged their inability to rely on the product label in the absence of an injunction.

National Republican Senatorial Committee loses ROP/Lanham Act/UCL claims against alleged "Scam PAC"

National Republican Senatorial Committee v. Red Senate, 2025 WL 819711, No. 8:24-cv-02301-JVS-KES (C.D. Cal. Jan. 14, 2025)

NRSC sued Red State, alleging that it was exploiting Senator Rick Scott’s “name, image, and likeness without his consent to deceive and scam potential donors...” Red State is a Super PAC, which may accept “unlimited contributions” from nearly any domestic source “so long as it does not coordinate its public communications with any federal candidate.” But NRSC alleged that it was a scam, misleading donors “into believing that their contributions will support a particular candidate or cause, when in reality the Scam PAC plows that cash into endless fundraising that ultimately funds little more than the salaries of its officers and its preferred vendors, who profit handsomely.”

NRSC alleged that, according to FEC disclosures, Red Senate raised over $2.6 million in the 2019-2020 election cycle and spent over $1.1 million in total disbursements during the cycle, including over $1 million in operating expenses. The 2021-2022 election cycle had similar numbers, and, at the time the complaint was filed, Red Senate had raised over $300,000 in the current election cycle, and spent over $500,000, with approximately $450,000 going towards operating expenses. Thus, NRSC alleged, Red Senate merely compensates vendors and keeps any leftover cash, harming the candidates “they purport to be supporting” in the process.

Red Senate allegedly allocates the bulk of its spending to Wavecrest or Google Ads. According to the Google Ads Transparency Center, Red Senate has paid between $35,000 to $40,000 for Google ads mentioning Senator Scott, which were shown between 70,000 to 80,000 times throughout the United States. The advertisements specifically state: “Red Senate for Rick Scott - Keep Florida Red in 2024,” and “Red Senate for Rick Scott - Take Back Our Senate in 2024.” Red Senate also reported making independent expenditures in the 2024 Florida Senate race; however, as of October 2, 2024, none of the reported expenditures expressly advocated for Senator Scott or his opponent. Rather, “the reported expenditures served to raise funds for Red Senate while using Rick Scott’s name and likeness.”

Senator Scott allegedly assigned his rights to NRSC, and, “as the only national party committee solely purposed to supporting Republican senate candidates,” NRSC claims to have an independent interest in stopping false advertising and false personification of Republican candidates. NRSC sued for California statutory and common law right of publicity violations, Lanham Act false advertising, and unfair competition under California’s UCL.

The court took judicial notice of the existence of disclaimers on Red Senate’s website, though not their accuracy, and did the same for the content of FEC reports filed by Red Senate. And it took judicial notice of the “fact that there has been significant news media coverage of Senator Rick Scott, his 2025 campaign for re-election to the United States Senate, and his opponent Debbie Mucarsel-Powell.”

Initially, NRSC’s statement that Senator Scott’s assignment was exclusive was sufficient to establish standing to assert his claims as an initial matter. But did Scott have statutory Lanham Act standing? He needed to allege an “injury to a commercial interest in reputation or sales.” NRSC argued that the parties competed in “the political-fundraising marketplace,” meaning that “potentially millions of dollars were diverted from his campaign.” But the complaint didn’t so allege; its only allegations focused on the deception of donors. But the court granted leave to amend. (Seems like “commercial advertising or promotion” is going to be an insuperable barrier here.)

California’s UCL requires “the plaintiff to be the one ‘who has suffered injury in fact and has lost money or property as a result of the unfair competition.’ ” Consequently, “an injured [party’s] assignment of rights cannot confer standing on an uninjured assignee.” NRSC’s allegation of its own interest in stopping false advertising and false personification of Republican candidates was not enough to satisfy this burden; again, there was leave to amend.

As for the California claims, they were subject to anti-SLAPP analysis. NRSC argued that its complaint “challenges Red Senate’s deceptive conduct in fundraising—not the message it conveys in its ads,” so that the lawsuit did not “arise from” any statements that Red Senate made “in relation to political campaigns.” Instead, it arose from its post-speech conduct—its spending allocation. (I thought political spending was speech.) The court was unpersuaded by these arguments. “First, it is well settled that the anti-SLAPP statute applies to conduct in furtherance of the right to free speech, in addition to the protected speech itself. Second, even if the lawsuit as a whole challenges Red Senate’s disbursement of funds, the right of publicity claims specifically target Red Senate’s use of Senator Scott’s name in Google ads.” The speech was itself allegedly wrongful, not merely evidence of a wrongful act (fundraising misconduct). “[H]ad Red Senate never used Senator Scott’s name in its Google advertisements, NRSC would have no right to publicity claims.”

Thus, the burden shifted to NRSC to demonstrate a probability of prevailing on the merits of its claims. For a common law cause of action for commercial misappropriation, a plaintiff must prove: “(1) the defendant’s use of the plaintiff’s identity; (2) the appropriation of plaintiff’s name or likeness to defendant’s advantage, commercially or otherwise; (3) lack of consent; and (4) resulting injury.” The statutory cause of action requires commercial misappropriation.

Red Senate argued that its speech was related to a political campaign, a matter of public interest, and that NRSC couldn’t prove that Scott’s image was used “exclusively” for commercial gain. NRSC’s argument that Red Senate’s speech was unprotected because it was fraudulent lacked sufficient evidence. The exception for political speech isn’t limited to specific types of political campaigns; nor does the “underlying purpose of one’s dissemination of a political message” determine whether an exception applies. Motion to strike granted, with leave to amend. (How could there be a successful amendment, especially for the statutory cause of action?)

"plant-based" is plausibly misleading without qualification; can asterisks save the day?

Whiteside v. Kimberly Clark Corp., No. 23-55581, 2024 WL 3435308, -- F.4^th --- (9th Cir. Jul. 17, 2024)

Whiteside alleged that KC’s “plant-based” baby wipes were misleadingly advertised; the court of appeals revived some claims that the district court had dismissed for failure to sufficiently plead misleadingness. The same stresses that have caused courts to occasionally modify the (nontextually-based) Lanham Act distinction between “explicitly false” and “misleading” here show up with competing interpretations of what an “unambiguous” front-of-package claim means. Just as the Lanham Act’s text does not make the distinctions courts have adopted, consumer protection laws don’t use “ambiguous” in their text either. In practice, “unambiguous” tends to mean “I think reasonable consumers could be fooled by this.” That might be as good a rule as we can practically get unless we want to restore caveat emptor, but it would be more useful for courts to write in terms of “reasonable consumers could think they had all the information they needed from the front of the package” than of “ambiguity.” The court here takes useful steps in that direction.

Whiteside alleged that the words “plant-based wipes” (or “plant-based ingredients”) and “natural care®” on the front label, together with the nature-themed imagery displayed on the packaging, suggest that Defendant’s baby wipes contain only “water, natural ingredients, and ingredients that come from plants and that are not subject to chemical modification or processing.” But they also contain synthetic ingredients that do not come from plants and are subject to chemical modification or processing.

Examples of the packaging:

 

The district court distinguished (1) labels where an asterisk was placed after “plant-based wipes*” and a corresponding qualifying statement (“*70%+ by weight”) was present elsewhere on the front label (the “Asterisked Products”); and (2) labels on which no asterisk or qualifying statement appeared on the front label. For both, directly preceding the ingredients list is a statement reading: “NATURAL AND SYNTHETIC INGREDIENTS.” Back label images:

 

closeup of ingredients list

After making the distinction, though, the court found that both sets of labels were ambiguous and therefore it was unreasonable to be fooled instead of consulting the back label.  The district court reasoned that when a product’s front label is not “unmistakably clear about the facet for which she seeks more information,” a reasonable consumer is expected to look to other features of the packaging, such as the fine print on the back label. Anyway, the term “plant-based” “plainly means mostly, not necessarily all, derived from plants,” making the Unasterisked Products not misleading as a matter of law, even without reference to the back label.

The court of appeals reversed as to the unasterisked products. The Ninth Circuit has long held that reasonable consumers aren’t “expected to look beyond misleading representations on the front of the box to discover the truth from the ingredient list in small print on the side of the box.” Thus, the rule is that, “if a product’s front label is plausibly misleading to reasonable customers, then the court does not consider the back label at the pleadings stage. Whether the back label ultimately defeats the plaintiff’s claims is a question left to the fact-finder.”

On the other hand, if the front label is only plausibly ambiguous, the back can resolve the ambiguity. Indeed, the Ninth Circuit has held that “other contextual factors aside from the back label can defeat claims that a product’s label is misleading,” specifically in its manuka honey decision. In that case, the court said, the “foremost” reason for finding only ambiguity was that, “given the foraging nature of bees, a reasonable honey consumer would know that it is impossible to produce honey that is derived exclusively from a single floral source,” and “[a] reasonable consumer would not understand Trader Joe’s label . . . as promising something that is impossible to find.” Its low price and use of a honey grading scheme also meant that “100% New Zealand Manuka Honey” was not misleading. Here, the court says, it was very important in that case that manuka honey is “a niche, specialty product,” and that buyers were “undoubtedly more likely to exhibit a higher standard of care than a parent walking down the dairy aisle in a grocery store, possibly with a child or two in tow, who is not likely to study with great diligence the contents of a complicated product package.”

KC argued that a front label was ambiguous if it can have more than one possible meaning. Whiteside argued that a front label can be unambiguous if it was plausible that a reasonable consumer would view the label as having one unambiguous (and deceptive) meaning. Whiteside was correct. The plaintiff doesn’t have to prove unambiguous deceptiveness to avoid dismissal at the pleading stage. Instead, “a plaintiff must plausibly allege that the front label would be unambiguously deceptive to an ordinary consumer, such that the consumer would feel no need to look at the back label.” Thus, a front label is ambiguous if “reasonable consumers would necessarily require more information before they could reasonably conclude” that the front label was making a specific representation. The California courts have followed this rule, for example in the One-a-Day case, which “acknowledged that some sophisticated consumers might not interpret ‘One A Day’ literally and would inquire into the back label. But other reasonable consumers might take the front label at face value and assume that they needed to take only one vitamin daily. … Put another way, reasonable consumers would not necessarily require more information before concluding that they needed to take only one vitamin daily.”

The unasterisked products were plausibly misleading.  “Plant-based” “plausibly conveys a concrete and unambiguous meaning to a reasonable customer: that the product is entirely plant- based and exclusively contains ‘natural’ materials.” It was not an “all-but-meaningless marketing term” like “Nature Fusion,” especially combined with allusions to “natural care” and nature imagery

Although consumers could consult the back label, “[f]ront-label ambiguity is determined not by whether a consumer ‘could’ look beyond the front label, but whether they necessarily would do so.” The district court’s standard would always require a consumer to consult the back label, which contradicts controlling precedent.  Plus, baby wipes aren’t a niche, specialty product. “[C]onsumers of everyday items are not expected to study labels with the same diligence as consumers of specialty products.”

The district court also reasoned that the products were in fact “plant-based” because they contained at least 70% plant-based ingredients by weight. But California prohibits both literally false and misleading ads. And the district court’s definition of “plant-based” as “mostly, not necessarily all, derived from plants” had little support.

Even if consumers understand “tomato-based sauce” to mean “mostly but not all tomatoes,” that’s not helpful here, where the issue was not a characterizing ingredient. “[T]here is no reason to assume that consumers interpret all terms ending in ‘-based’ in the same way,” any more than they interpret “100%” the same way in every label.

Reasonable consumers also understand that meat does not grow on trees, yet technology has advanced such that plant-based meat is now available. Consumers could reasonably suppose that manufacturers have similarly devised a way to make baby wipes using only plant-based compounds.… Unlike bees … , which are familiar to anyone who has encountered vegetation,  most people likely have  not contemplated how baby wipes are made. Similarly, most consumers likely have not considered whether synthetic ingredients are necessary to make wipes “shelf-stable,” a term that is not part of

The court further pointed to the FTC’s “Green Guides,” which warn that unqualified representations like “made with renewable materials” are likely to mislead a reasonable consumer to believe that a product “is made entirely with renewable materials.” Although the FTC has declined to provide guidance on the term “plant-based” specifically, it’s the lack of qualification that is significant here; the FTC recommends using percentages or other qualifiers.

On the other hand, the use of an asterisk and the qualifying statement “*70+% by weight” on the front label of the Asterisked Products “ameliorate[s] any tendency of [the] label to mislead.” Those tracked the Green Guides’ recommendation for qualifications and complied with California law adopting the Green Guides. Even assuming that “70%+ by weight” is ambiguous, a reasonable consumer would require more information from the back label, which clarifies that the Products contain both “natural and synthetic ingredients.” “Even before reading the back label, the presence of an asterisk alone puts a consumer on notice that there are qualifications or caveats, making it unreasonable to assume that the Products were 100% plant- based.” (I don’t think the court thinks that it has taken back everything it said in the first part of the case, but maybe it has. If you thought the message was clear, how would you know that the asterisk related to the message you thought was clear and not to some other or peripheral feature? That’s the FTC’s reasoning for why asterisks and “disclosure” aren’t good qualifiers.)

9th Circuit holds that California's Sherman Act can be enforced by private plaintiffs

Davidson v. Sprout Foods, Inc., --- F.4th ----, 2024 WL 3213277, No. 22-16656 (9^th Cir. Jun. 28, 2024)

In a surprisingly-to-me divided opinion, the majority rejects a theory that private claims under the UCL using California’s Sherman Act as a predicate were impliedly preempted by the FDCA, because the FDCA isn’t supposed to be enforced by private parties. Although the existence of explicit preemption doesn’t always mean that there’s no implied preemption as well, the FDCA’s preemption clause is specific enough to the Sherman Act situation that I would have thought it was obvious that there’s no implied preemption. At least the majority agrees with me!

Anyway, the Sherman Law “incorporates by reference all federal food labeling standards. These include a prohibition against labeling the front of baby food containers with the product’s nutrient content.” That's because babies' nutrient needs aren't the same and the FDA was worried about, e.g., conspicuous low-fat claims. Defendant “nevertheless produced pouches of baby food with labels on the front of the package conspicuously stating the amount of nutrients the pouches contained.”

example pouch making protein, fiber and DHA claims

The district court found preemption; as the majority reasoned, federal law “expressly permits states to enact standards identical to the federal standards and in this case, plaintiffs are attempting to enforce identical standards set forth in a state statute, the Sherman Law. The federal law does not limit the manner in which the state statute is enforced, and private enforcement of that statute does not conflict with federal enforcement of the FDCA.”

Although the Ninth Circuit has found implied preemption where plaintiffs were trying to enforce duties allegedly created by the FDCA, those were drug/device cases, not cases brought under the Sherman Law, a law expressly permitted by the FDCA. “There is no reason we can perceive why Congress would permit states to enact particular legislation and then deny enforcement by their citizens.” Indeed, Medtronic, Inc. v. Lohr, 518 U.S. 470 (1996), interpreted a similar preemption provision and held that “[n]othing ... denied [the state] the right to provide a traditional damages remedy for violations of common-law duties when those duties parallel federal requirements.”

The dissent would have found that the exclusion of private suits from the FDCA meant that, at most, states could only create agencies to enforce laws like the Sherman Law, but the majority correctly found that atextual. One provision of the FDCA, § 310(b), allows states to enforce certain provisions of federal law—but that deals only with enforcement of federal law, not enforcement of state law. The dissent (a Trump appointee) would instead have required the state law being enforced to come “independently” from the common law, not from state adoption of federal standards. Conservatives love the common law when it’s used to disable legal remedies, but the majority noted that this jury-rigged standard didn’t make sense. (The dissent concludes that state enforcement of “identical” rules interferes with the FDCA’s scheme only when the common law isn’t involved—it is anti-legislative and allocates all power to courts.)

The presumption against preemption was unnecessary here, but also favored allowing the claim.

However, fraud-based claims were properly dismissed for failure to plausibly allege misleadingness. (I note that, on remand, there might be causation difficulties with the harm story for the pure Sherman Act violation, but then again the plaintiffs can argue that, in a world complying with the law, the products wouldn’t have been available for sale.)

As for those claims, plaintiffs alleged that Sprout’s labels “misled consumers into believing the products provided health benefits to children under two when the products were in fact nutritionally and developmentally harmful.” But they failed to meet Rule 9(b)’s heightened pleading requirement by failing to sufficiently allege why this implied message was false. Plaintiffs alleged that Sprout’s products contain high amounts of sugar and that sugars in pureed, pouch-based foods can lead to health issues such as tooth decay and cited to several articles and reports suggesting that pouch-based foods may lead to long-term health risks and hinder babies’ development. But these allegations were “largely unspecific to Sprout’s products.” They didn’t explain “at what level sugars become harmful or why the levels of sugar in these products, in particular, could cause harm.” Other harm allegations were “largely speculative”: “consumption of pouches may lead to long term health risks”; that if babies are “overly dependent on pouches,” there are “noted delays in [their] motor development”; and that pouches “can be a gateway to bad long-term snacking habits and routine overeating.” Plaintiffs never actually alleged that Sprout’s products cause any of these harms.

 

US News rating was mere opinion except as to school that intentionally submitted bad information to it

Favell v. Univ. of Southern Cal., 2024 WL 751006, No. CV 23-3389-GW-MARx (C.D. Cal. Jan. 23, 2024)

Plaintiffs alleged that defendants conspired to inflate the US News ranking of USC Rossier School of Education by submitting inaccurate or incomplete data to US News and market the resulting ranking to the public. USC had a business relationship with 2U, an education technology startup, to develop an online Master of Arts in Teaching program. This was the first of USC Rossier’s online degree programs and went live in June 2009; 2U received an undisclosed percentage of the tuition revenue.

US News calculates its education school rankings using eleven criteria, including “student selectivity,” which accounts for 18% of the school’s total score and is comprised of three objective sources of admittance data: (1) the school’s doctoral acceptance rate (6%); (2) mean GRE quantitative scores (6%); and (3) mean GRE verbal scores (6%).

During the relevant period—through 2021—US News didn’t distinguish between in-person and online programs. However, USC submitted student selectivity data only for USC Rossier’s highly selective, in-person Ph.D. program, but not from its less-competitive EdD program (which was offered online after 2015). From the 2009 rankings to the 2010 rankings, USC Rossier’s reported acceptance rate dropped 40 percentage points (from 50.7% to 10.5%), and its ranking rose 16 places (from #38 to #22). US News began publishing a specialty ranking of online master’s degrees in education in 2013, when USC Rosier’s online Master of Arts in Teaching program ranked #44. USC didn’t appear on the list after that.

Defendants allegedly heavily marketed USC Rossier’s rapidly rising ranking to the public to boost enrollment in the online programs. USC allegedly orchestrated this scheme through its submission of false/incomplete data, and then advertised the resulting rankings knowing that they were misleading. 2U allegedly helped “push the rankings out on a much broader scale,” and knew or should have known that the rankings were fraudulently procured. For example, 2U engaged in online advertising to promote USC Rossier’s ranking; it spent more than half of its revenue on program sales and marketing. USC likewise regularly touted USC Rossier’s ranking (and that USC Rossier was “top-ranked”) in press releases, on social media, on the Rossier Website, and in other promotional materials.

Fortunately for 2U, the court thought it was accused only of puffing. The court considered two kinds of statements: (1) statements that USC Rossier was “top-ranked,” and (2) statements which included the specific numerical ranking assigned by US News.

The first category was “textbook puffery.” A claim that a school is “top-ranked” is both “vague [and] highly subjective” and lacks “the kind of detailed or specific factual assertions that are necessary to” test the truth of the claim.

Some ads included a specific numerical US News ranking. For example, USC published a “News Alert” on the Rossier Website celebrating the fact that it “ha[d] just been ranked 22nd in U.S. News and World Report’s 2010 edition of America’s Best Graduate Schools.” On an earlier motion to dismiss, the court had found that this was potentially actionable because the allegations

do not target US News’ selection or weighing of the objective criteria which determine the rankings.... Instead, Plaintiffs claim that Defendants knowingly reported false data to US News. Those underlying data are entirely falsifiable, and the weight that they were to be assigned by US News was predetermined. The fact that such data were considered alongside other subjective considerations to produce a final ranking does not render USC’s promotion of the allegedly fraudulently obtained ranking non-actionable. As Plaintiffs note, if the law were otherwise, “any business that submits false information to get a certification ... could not be held liable because each of those certifications would have at their core a methodology based on an opinion as to which data points should be considered.”

2U argued that, since it didn’t knowingly provide false data, this reasoning didn’t apply to it. Plaintiffs responded that they still weren’t targeting US News’ choices about how to rank, only the underlying false data, and that false advertising is strict liability. The court, I think wrongly, agreed with 2U: to proceed, plaintiffs needed to allege that 2U knew of that falsity or lacked a good faith belief in the accuracy of the rankings. And since rankings and ratings are “almost universally” treated as statements of opinion, “even if [one] could draw any fact-based inferences from [the] rating, such inferences could not be proven false because of the inherently subjective nature of [the] ratings calculation” as long as the party expressing the opinion honestly entertained it and didn’t have superior knowledge or special information.

Although US News is the one with the opinion here, a reasonable consumer could construe defendants’ affirmation of that opinion as implying that the defendants “held some good faith belief in its accuracy (i.e., that it was not fraudulently obtained).” Plaintiffs plausibly pled lack of good faith as to USC, but not as to 2U; alleged negligence was insufficient.

Although there’s no mens rea requirement in California’s consumer protection statutes, that goes to a separate issue:

Although Plaintiffs are correct that the negligent dissemination of a false statement of fact would suffice, Plaintiffs do not allege that 2U’s advertisements were literally false, nor could they. The question here, therefore, is whether 2U’s advertisements are even actionable in the first instance – i.e., are they misleading because they imply any false assertions upon which a reasonable consumer could rely? In most instances involving statements of opinion, the answer to that question will be “no.” In some cases, however, a statement of opinion may “reasonably ‘be interpreted ... as an implied statement’ that the speaker ‘knows facts sufficient to justify him in forming’ the opinion, or that he at least knows no facts ‘incompatible with [the] opinion.’ ” If and only if that implied statement is false – and the speaker does know of undisclosed fact incompatible with the opinion – is the opinion is misleading. In other words, requiring that Plaintiffs allege knowledge of the falsity underlying US News’ opinions in not contradicted by the absence of a mens rea requirement under the statutes ….

Nor did plaintiffs successfully plead joint/secondary liability. Liability under the UCL and CLRA “cannot be predicated on vicarious liability.” It “must be based on [defendant’s] personal ‘participation in the unlawful practices’ and ‘unbridled control’ over the practices that are found to violate [the UCL] or [FAL].” In making this determination, courts have focused on various factors such as whether the defendant: (1) “issued [its] own advertisements” or merely repeated the deceptive statements of another, (2) “controlled the language” or “reviewed or monitored the representations” made by another, or (3) had notice of the violating conduct.

The service agreement between the parties wasn’t enough to make 2U liable. Under the agreement, “USC was required to (1) market the online programs ‘in a manner comparable to’ the in-person programs; (2) ‘consult with [2U] in the development of additional Promotional Strategies’; and (3) provide 2U ‘with access to information pertaining to both classroom-based and online students’ admissions, performance, and post-graduation outcomes.’ ” Although plaintiffs alleged that 2U bought ads, they didn’t allege that 2U actually issued or authored any of the advertisements upon which they relied. The mere fact that under the agreement, USC was required to market the online programs “in a manner comparable to” the in-person programs and “consult with [2U] in the development of additional Promotional Strategies” didn’t show that 2U controlled the statements at issue here. “USC maintained the main Rossier website” where the allegedly misleading statements were posted, and any marketing materials 2U made were “subject to USC’s written approval prior to any use.”