Courts are experiencing a recent surge of consumer class action filings alleging that manufacturers are misrepresenting the manner of procurement of materials for their products. These allegations center around claims of “ethical sourcing.” Broadly speaking, the goal of ethical sourcing is to ensure that a company only buys products and materials that are produced under reasonable working conditions and with fair pay for workers, as well as with minimal impact on the environment. Ethical sourcing is intended to reinforce social and environmental responsibility by companies.
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Misbranded is Patterson Belknap’s blog covering false advertising litigation—both consumer class actions and competitor suits—with a particular focus on FDA-regulated products (foods/beverages, pharmaceuticals, cosmetics, and dietary supplements). Writing from the industry perspective, we provide timely updates on important cases, surveys of litigation trends, and in-depth analyses of “hot” legal issues. Our firm pioneered the modern practice of false advertising law more than 40 years ago, bringing the first competitor suits under the Lanham Act. In the decades since, we have continued to practice at the cutting edge, handling many of the field’s most groundbreaking cases on behalf of the nation’s best-known businesses. Today, led by Steven A. Zalesin, our team advocates creatively, strategically, and efficiently on behalf of our clients at all phases of litigation, from pre-complaint demands to Supreme Court appeals.
Hold onto your chips.
This blog has covered an array of dubious mislabeling theories, but a recent complaint filed in Illinois federal court may take the guac: a proposed class-action complaint against Frito-Lay North America, Inc. (“Frito Lay”) alleges that Frito-Lay’s “Hint of Lime” Tostitos are misleadingly packaged because the chips—which prominently display the phrase “HINT OF LIME” on the front of the bag—contain only a “negligible amount” of lime. As the complaint itself recognizes, consumers understand the word “‘hint’ the same way as its dictionary definition—a slight but appreciable amount.” Compl. ¶ 13. But rather than deliver a hint of lime, the complaint alleges, the chips contain only lime flavoring—or a de minimis amount of lime. In other words, the hint of lime label is misleading because…the chips only contain a hint of lime. You read that right.
Earlier this month, this blog analyzed the preemption provisions of the Federal Meat Inspection Act (FMIA) and the Poultry Products Inspection Act (PPIA), which together regulate the labeling of meat and poultry products. We explained that trial courts in California and elsewhere routinely dismiss false advertising claims challenging statements on meat and poultry labels based on the statutes’ preemption provisions, which prohibit states from imposing requirements different from or in addition to federal law. Courts have specifically focused on the FMIA and PPIA’s pre-approval requirements in concluding that such challenges are preempted.
Preemption is a familiar battlefield for litigants challenging or defending advertising claims made on the labels of federally regulated products. Plaintiffs bringing claims under state law must contend with the fact that federal laws often contain preemption clauses that prohibit states from imposing requirements different from or in addition to those found in federal law. We have previously covered cases dealing with preemption in the context of the federal Food, Drug, and Cosmetic Act (FDCA) here and here.
Two (Out of Three) Thumbs Down: Divided Ninth Circuit Panel Rules Rigged Product Reviews Can Be Actionable False Advertising
When you’re in the market for a fresh haircut or a new restaurant, innumerable business and product reviews are available to guide you towards a cleaner trim or tastier takeout. But what happens when the reviewer is not an impartial arbiter, but a less-than-honest broker disguising a financial interest in the service or product they’re applauding? And can a reviewer be held liable for false advertising if the reviews are secretly paid product placements?
Did You See That? Defeating Class Certification Where Class Members Did Not See the Challenged Advertisement
In putative class actions alleging false advertising, plaintiffs often argue that class certification is appropriate because the language being challenged appeared on the defendant’s marketing materials or product label, thereby making the class members’ experience—and the question(s) to be resolved—common. These plaintiffs invariably claim that individualized questions of deception and reliance do not defeat certification, because consumer protection statutes employ an objective, “reasonable consumer” test that does not turn on what each individual class member actually thought or believed.
This blog previously reported on the Seventh Circuit oral argument in Bell v. Albertson Companies Inc.—a case turning on whether a reasonable consumer would understand the phrase “100% Grated Parmesan cheese” on a cheese canister to mean that the product contained literally nothing but cheese. The Defendants had argued that reasonable consumers could not be deceived by such a claim, even though their products contained a small amount of cellulose powder and potassium sorbate mixed in with the grated Parmesan to act as a preservative. This was so, they maintained, since (1) the ingredient list expressly disclosed that non-cheese ingredients were present in the canisters, and (2) the canisters’ position on unrefrigerated store shelves should have signaled that a preservative was present. The district court dismissed these “100% claims” for failure to state a claim, and Plaintiffs appealed.
Last month, the Fourth Circuit joined other Circuits in finding that Lanham Act false advertising and false association claims are governed by a case-specific equitable analysis of laches rather than a hard and fast statute of limitations. Although the Bayer decision may appear more forgiving to plaintiffs looking to pursue older claims, the Fourth Circuit made clear that, in the ordinary case, plaintiffs bringing claims after the applicable limitation period expires will face an uphill battle in obtaining relief.
In a significant case for class action litigants, the Supreme Court is expected to resolve a circuit split over the standing requirements applicable to absent class members, and weigh in on the circumstances – if any – under which statutory violations can be deemed to give rise to Article III injury for such class members. The Supreme Court’s holding may have far-reaching implications for many varieties of class actions, including consumer protection and data privacy suits.
Federal law expressly authorizes manufacturers of dietary supplements to make “structure/function” claims—that is, claims about the effect of particular nutrients on the structure or function of the human body. (Think: “vitamin C supports the immune system” or “calcium supports healthy bones”). Despite this federal authorization, consumers often attempt to bring state-law challenges to manufacturers’ structure/function claims, asserting that they are false or misleading. This type of clash between federal and state law is a classic recipe for preemption. And that is especially true where the relevant federal statute—here, the Food, Drug, and Cosmetic Act (FDCA)—contains an express preemption clause. See 21 U.S.C. § 343-1(a).
In a recent decision, McGee v. S-L Snacks Nat’l, 982 F.3d 700 (9th Cir. Dec. 4, 2020), the Ninth Circuit upheld a district court’s dismissal of a putative class action for lack of Article III standing. McGee is notable for the court’s willingness, at the motion-to-dismiss stage, to subject a consumer’s theories of injury to meaningful scrutiny, and for its willingness to disregard conclusory and implausible allegations of harm. It also serves as a helpful reminder that disclosures in a product’s ingredients list can be highly relevant in assessing the plausibility of a consumer’s claimed losses.
In a recent decision, Ezaki Glico v. Lotte International American Corporation, the Third Circuit rejected a manufacturer’s claims of trade dress infringement regarding Pocky, a chocolate covered cookie stick which Ezaki Glico invented in the 1970s. The court concluded that Pocky’s overall shape and look—cookie sticks partially coated in chocolate—were functional and thus not protected from competitor imitation.
On September 17, the Seventh Circuit heard argument in Ann Bell v. Albertson Companies Inc. The case hinges on whether a reasonable consumer would understand the phrase “100% Grated Parmesan cheese” on a Parmesan cheese canister to mean that the canister contains literally nothing but cheese. The plaintiffs argued that they believed just that, when in fact the cheese product in question contained cellulose, which the defendants claimed was used as an anti-caking agent and the plaintiffs claimed was used as “filler".
In False Ad Dispute Between Inhaler Companies, Court Grants PI Enjoining Unsupportable Clinical Superiority Claims
In its recent decision granting a preliminary injunction in GlaxoSmithKline v. Boehringer Ingelheim Pharmaceuticals, No. 19-5321, the United States District Court for the Eastern District of Pennsylvania enjoined a pharmaceutical company from making certain marketing claims of clinical superiority that the Court found did not match up with the study results purportedly supporting them. In doing so, the Court offered instructive guidance on the proof required to show falsity under the Lanham Act and on the showing necessary to justify preliminary injunctive relief.
Over the past few months, federal courts throughout the country have stayed litigation challenging the labeling of products infused or made with cannabidiol, better known as CBD. These courts, acknowledging that labeling and product quality requirements for CBD products remain unclear, have cited the need to permit the U.S. Food and Drug Administration (“FDA”) to promulgate uniform rules or regulations focused on CBD, which the agency has indicated are forthcoming in a series of recent administrative actions and public statements. Staying these cases affords FDA room to fashion a comprehensive regulatory framework in this still-novel industry, rather than allowing plaintiffs to usurp that role via the judicial process.
Federal food-labeling laws preempt state laws that impose requirements different from or in addition to those established by federal law. In some cases, the FDA has spoken directly to a labeling issue by regulation, and if the food manufacturer is in compliance with that regulation, any state-law liability should be preempted. Careful plaintiffs often try to draft their allegations to get around a federal regulation that would otherwise preempt their claims. For instance, in challenging a defendant’s representations concerning honey in a cereal, a plaintiff avoided the defendant’s compliance with the federal labeling regulation on “flavoring” by alleging she was deceived about the relative amount of honey as a sweetener (which is not covered by a specific FDA regulation), rather than the relative amount of honey as a flavoring agent (which is covered). When courts allow creative pleading to circumvent a preemption defense, defendants are deprived of the protections that Congress intended to provide them under federal labeling law, at least at the outset of the case. But as a recent decision shows, defendants may be able to renew and succeed on a preemption defense after discovery shows plaintiff’s artful allegations were just that.
The Illinois Biometric Information Privacy Act (“BIPA”) protects individuals against the unlawful collection, storage and use of their “biometric” information. Under BIPA, plaintiffs may bring claims against companies for failing to obtain informed consent before collecting biometric identifiers (including fingerprints and face scans) and for not maintaining proper privacy policies and procedures for storage of that information. Because the harm can be nebulous — for example, the economic harm from a violation is not always obvious — these cases often raise issues about what constitutes an actual “injury” sufficient to confer standing. Indeed, a number of recent cases in this area have given rise to an emerging circuit split. As in the false advertising context, some courts have permitted such cases to go forward on mere allegations of “bare procedural violations.” As these cases proliferate, we’ll be watching closely to see whether courts begin to apply the Article III criteria appropriately rigorously, as they have increasingly done in the false advertising context.
Our parents and teachers taught us that “two wrongs don’t make a right.” But in the world of Lanham Act litigation, the opposite is often true. When defending a Lanham Act claim brought by a competitor, the doctrine of unclean hands—the lawyerly version of “But they did it too!”—can be a case-dispositive argument. Last month, the Ninth Circuit made it a bit easier to establish this defense, holding that a defendant arguing unclean hands need not prove that the plaintiff’s unclean conduct caused “actual harm.” See Certified Nutraceuticals, Inc. v. Avicenna Nutraceutical, LLC, 2020 U.S. App. LEXIS 22351 (9th Cir. July 27, 2020).
The past few months have witnessed a veritable sugar rush of decisions dismissing consumer class action complaints alleging that baking chips and candies labeled as “white” falsely imply the presence of actual white chocolate. See, e.g., Prescott v. Nestle USA, Inc., 2020 WL 3035798 (N.D. Cal. June 4, 2020); Rivas v. Hershey Co., No. 19-CV-3379(KAM)(SJB), 2020WL 4287272 (E.D.N.Y. July 27, 2020); Cheslow v. Ghirardelli Chocolate Co., 2020 WL 4039365 (N.D. Cal. July 17, 2020). Each of these decisions is noteworthy for holding, at the pleadings stage, that a consumer’s purported interpretation of a labelling claim is unreasonable as a matter of law. But Cheslow is particularly instructive, as it recognizes that even consumer survey evidence cannot convert an implausible interpretation of a labeling claim into a reasonable one.
Increasingly, consumers base their purchase decisions on facts about a company or its product that have nothing to do with the performance or quality of the product itself. For example, does the manufacturer treat its workforce fairly? Is it a responsible steward of the environment? What are its stances on social issues like abortion or LGBTQ rights? To which parties or candidates does it (or its officers) donate? All of these facts—and countless others—are “material” to many consumers in the sense that they affect (or even dictate) purchase decisions. Indeed, in recent years, ethical, moral, and political concerns like these have led to countless instances of boycotts and other forms of consumer speech—a welcome sign of a healthy body politic and liberal democracy.
Flushable Wipes, Take Three: The Second Circuit Gets Injunctive Standing Right, But Classwide Damages Models Wrong
As our readers know, we’ve kept a close eye on the “flushable wipes” litigation—known variously as Kurtz v. Costco and Belfiore v. Procter & Gamble—as it has bounced between Judge Weinstein’s courtroom in the Eastern District of New York and the Second Circuit. The cases raise several issues important to class-action defendants, including the necessity of a rigorous damages model at the class-certification stage; the availability of injunctive relief to customers who are already wise to the alleged deception; and the appropriateness of massively multiplied “statutory damages” in the class context. We (and others) had hoped that the Second Circuit would use the case to provide clear answers to these questions and to remedy the New York federal courts’ status as a hotbed for questionable class-action complaints. But with that court’s latest ruling—fortunately, an unpublished and non-precedential one—those hopes may have gone down the tubes.
Injunction Defunction: The Second Circuit Extinguishes Injunctive Relief as a Remedy for Consumer False Advertising Claims
Last week, the Second Circuit issued an important published decision holding that previously injured consumers who seek to challenge product labeling lack constitutional standing to pursue claims for injunctive relief, and cannot obtain certification of an injunctive relief class under Federal Rule of Civil Procedure 23(b)(2). See Berni v. Barilla S.P.A., 2020 U.S. App. LEXIS 21167 (2d Cir. July 8, 2020). Although the Second Circuit’s holding arose in the context of a settlement class, not a litigation class, the court’s reasoning was not dependent on or limited to that specific context; rather, the panel held, in unqualified terms, that “past purchasers of a product . . . are not likely to encounter future harm of the kind that makes injunctive relief appropriate.” The Berni decision appears to close the door to injunctive relief for consumers asserting mislabeling claims in the Second Circuit.
What distinguishes a “cosmetic” from a “drug” under the Federal Food, Drug, and Cosmetic Act (FDCA)? The FDA has struggled to offer clear guidance on the distinction, but the classification as one or the other (or both) carries significant legal and regulatory consequences for manufacturers: a product that is a “drug” needs pre-market approval from the FDA, while a “cosmetic” does not. A cosmetic product that has not received this approval may not represent that, like a drug, it is “intended to affect the structure or any function of the body of man.” 21 U.S.C. § 321(g)(1). Thus, a product that claims to be capable of changing how part of the body works (e.g., “reduces cellulite” or “regenerates cells”), but has not been subjected to this pre-approval process, is considered mislabeled under the FDCA.
So Much For “Improved Memory”: Prevagen Class Decertified Post-Trial Due To Lead Plaintiff’s Forgetful Testimony
A California district court recently decertified, after a jury trial, a class of vitamin supplement purchasers in a false advertising case. As we detailed in a prior post, a federal judge declared a mistrial in the same case earlier this this year after the jury deadlocked. The case, Racies v. Quincy Bioscience, LLC, 15-cv-00292 (N.D. Cal.) (Gilliam, J.), was already interesting because certified class actions rarely make their way to trial. And it is rarer still for a district court to decertify a class following a trial. But setting those procedural quirks aside, the opinion may prove useful for defendants seeking to decertify or defeat putative classes on typicality and predominance grounds.
Latest Scoop on the “Happy Cows” Lawsuit: Court Dismisses False Advertising Claims Against Ben & Jerry’s
Patrons of Ben & Jerry’s ice cream should be familiar with Woody, the bovine mascot touted by the company as “the most interesting cow in the world.” Ben & Jerry’s packaging has long featured cartoon illustrations of Woody grazing beneath blue skies in bucolic green pastures. This past year, however, Woody ambled into the sights of the plaintiffs’ class action bar. Thankfully, she (and Ben & Jerry’s) emerged unscathed: the district court (D. Vt.) dismissed the case at the pleadings stage, affirming both the authority of district courts to dismiss implausible consumer protection claims and the requirement that plaintiffs seeking injunctive relief demonstrate a probability of future injury.
Liability Immunity Under The PREP Act: A Potent New Defense Against COVID-Related False Advertising Claims
Our national response to the COVID-19 pandemic has been made more difficult by a shortage of personal protective equipment and lifesaving drugs and medical devices. Some evidence suggests that manufacturers’ fear of lawsuits has exacerbated these shortages. Seeking to allay these concerns, in March 2020, the Secretary of the Department of Health and Human Services (HHS) issued a Declaration providing manufacturers, distributors, health professionals, and other “qualified persons” immunity against certain claims relating to COVID-19 “countermeasures.” See 85 Fed. Reg. 15198 (Mar. 17, 2020). In mid-April, HHS followed up with an Advisory Opinion clarifying the scope of liability immunity under the Declaration.
Much has been written about the Declaration’s potential as a shield against product liability suits. But does the Declaration also provide immunity from false advertising suits, including Lanham Act, common-law, and statutory consumer protection claims? There’s not yet any judicial precedent on this question, but the answer appears to be “yes”—at least in many cases.
Seventh Circuit Rejects Court Intervention In Light Beer Ad Wars: Is A New Trend Brewing In False Advertising Law?
The last few years have seen a pitched battle for market share among the manufacturers of America’s leading “light” beers—a battle that’s been waged not only in America’s bars and on the airwaves, but in the courtroom. Earlier this month, in Molson Coors v. Anheuser-Busch, Nos. 19-2200, 19-2713, 19-2782, 19-3097 & 19-3116, 2020 WL 2097557 (7th Cir. May 1, 2020), the Seventh Circuit gave Anheuser-Busch, the maker of Bud Light, a major victory in that battle, wiping out an injunction that the district court had entered in favor of Molson Coors, the maker of Miller Lite and Coors Light. That’s newsworthy in itself—but, because of its novel reasoning, the Molson Coors ruling may have broader significance for false-advertising law.
The Food, Drug, and Cosmetic Act (FDCA) promotes nationwide uniformity in food labeling by establishing a comprehensive federal labeling scheme and preempting state law that imposes different requirements. 21 U.S.C. § 343-1(a). Over the years, the FDA has issued regulations directed to specific labeling issues, including representations of a food product’s “primary recognizable flavor.” 21 C.F.R. §§ 101.22(a)(3), 170.3(o)(12). So long as a label’s representation of a “primary recognizable flavor” complies with the FDA’s flavoring regulation, the label is not misleading, and any state law that supposedly says otherwise is preempted.
This post originally appeared on Law360.
In Romag Fasteners Inc. v. Fossil Inc., the U.S. Supreme Court recently made it easier for Lanham Act plaintiffs to disgorge the ill-gotten profits of trademark infringers.
Naturally, the question arises: Since false advertising suits are also governed by the Lanham Act, does Romag apply to false advertising suits, too? The answer is likely yes — but there are important differences between the two types of suits that may make disgorgement awards more difficult for false advertising plaintiffs to obtain.
Earlier this month, in a consumer action challenging alleged slack-fill in boxes of Junior Mints and Sugar Babies, the Ninth Circuit considered the reach of the “catalyst theory” for recovering attorney’s fees under California law. See Gordon v. Tootsie Roll Industries, Inc., No. 18-56315, 2020 WL 1846920 (9th Cir. Apr. 13, 2020). Under this theory—which the U.S. Supreme Court has rejected for federal claims—a litigant may be considered a “successful party” entitled to seek a fee award upon a showing that the litigation impelled the defendant to take corrective action. Unfortunately for the plaintiff, the panel held that she was not a “successful party” under California law—even though the defendant had changed its marketing practices after the lawsuit was filed—because she had insisted that those changes would not resolve her gripes.
“Whether reasonable consumers would be deceived by a challenged advertisement is a question of fact that can’t be decided on a motion to dismiss.” This claim is one of the biggest sacred cows in false advertising litigation. But as the Second Circuit has made clear twice in the past year, it’s just a load of bull. Take, for example, Chen v. Dunkin’ Brands, Inc., --- F.3d ----, 2020 WL 1522826, which the Second Circuit decided unanimously earlier this week. In Chen, the court doubled down on its June 2019 holding that a court can decide at the pleadings stage “whether a reasonable consumer would have been misled by a particular advertisement,” Geffner v. Coca-Cola Co., 928 F.3d 198, 200 (2d Cir. 2019), affirming the dismissal of a false advertising claim involving the meaning of “steak.” In the process, the court also served up a tasty side dish of personal jurisdiction doctrine.
As coronavirus (COVID-19) spreads across the country, some companies are advertising their products’ usefulness in preventing or treating the disease. But federal agencies—including the Food and Drug Administration (FDA) and the Federal Trade Commission (FTC)—are close behind. Over the past few weeks, they have together sent more than a dozen warning letters to COVID-19 advertisers, insisting that they cease making coronavirus claims.
Last year, Arkansas enacted a “Truth in Labeling” law that placed restrictions on companies’ ability to label edible products with the term “meat” and other meat-related words. Arkansas Act 501 took effect July 24, 2019.
Food and beverage advertising, like other forms of speech, is usually entitled to First Amendment protection – even if it may not always enjoy the same caliber of protection as, for example, journalism or political speech. See, e.g., Sorrell v. IMS Health, Inc., 564 U.S. 552, 557 (2011) (“Speech in aid of pharmaceutical marketing . . . is a form of expression protected by the Free Speech Clause of the First Amendment.”)
Grains of paradise (aframomum melegueta), are a peppery, citrusy spice indigenous to West Africa, related to ginger and cardamom. The name purportedly derives from medieval merchants’ claims that the plant grew only in the Garden of Eden. Common to West African cuisine, grains of paradise are also one of the botanicals sometimes used to give gin its characteristic flavor.
In Florida, however, an obscure 1868 law makes it a third-degree felony to “adulterate … any liquor” with certain specified substances, ranging from grains of paradise and capsicum (chili pepper) to potentially deadly opium and “sugar of lead.” Fla. Stat. § 562.455. Some have postulated that this law’s original intent was to prevent consumer deception, as the banned ingredients were once added to liquor to make it taste stronger (more alcoholic) than it actually was. That same practice spurred an 1816 law of Parliament (56 Geo. III, ch. 58) making it illegal for brewers and dealers in beer to possess grains of paradise. Unlike merrie olde England, however, the Sunshine State never got around to repealing its law.
It was only a matter of time. As we anticipated last summer, the plaintiffs’ bar recently filed a slew of false advertising suits against manufacturers of products infused or made with cannabidiol, a/k/a CBD. This development was a fait accompli, given the combination of a booming CBD market, a murky federal regulatory landscape, and a patchwork of state regulatory efforts at varying degrees of development. This confluence of factors has paved the way for at least ten consumer lawsuits in the last six months against producers of CBD products. We expect more suits to follow in the near future as copycat suits are filed, CBD products become increasingly mainstream, and more deep-pocketed players enter the CBD market.
This blog has previously examined the recent spate of so-called “slack-fill” lawsuits, in which consumers claim that a food (or other) product is misleadingly packaged because it contains excess air. We noted that the growing trend is for courts to reject such suits at the motion-to-dismiss stage, for a variety of reasons. For example, courts have found slack-fill complaints deficient for failing to allege, beyond conclusory platitudes, that the package’s empty space serves no legitimate function, or for failing to allege with plausibility that a reasonable consumer would actually be deceived. Late last year, in Benson v. Fannie May Confections Brands, Inc., the U.S. Court of Appeals for the Seventh Circuit issued an important decision affirming the pleadings-stage dismissal of a slack-fill suit, but based on a distinct justification: the failure to plausibly allege any cognizable damages associated with slack-filled packaging.
Prevagen Maker Avoids Sting of Defeat as Judge Declares Mistrial in Consumer False Advertising Class Action
On January 14, faced with a deadlocked jury, a federal judge in California declared a mistrial in a consumer class action involving the marketing of Prevagen, a popular dietary supplement based on jellyfish-derived proteins that claims to improve brain functioning and memory. This outcome runs counter to the conventional, but mostly untested, viewpoint that juries tend to favor the plaintiffs in consumer class actions. The Prevagen trial also underscores that scientific uncertainty about the truth of an advertising claim may present challenges for the defense in the earlier stages of a class action, but become an advantage for a defendant who chooses to fight all the way to trial.
FDCA Preclusion: When Can a Manufacturer Defeat a Competitor’s Lawsuit by Complying with FDA Regulations?
As many readers probably know, when a food or beverage manufacturer gets a consumer class action alleging that its labeling violated state law, one of the first things it should do is consider whether the disputed aspect of the labeling is covered by the federal Food, Drug and Cosmetic Act (“FDCA”). Many provisions of that statute—and, by extension, their implementing regulations—expressly preempt non-identical state-law regulations. If a putative class of consumers is asking a manufacturer to do something different with its labeling than those provisions do, there is a strong argument that the case is preempted: federal law (the FDCA) trumps state law (the relevant consumer protection statute).
A few months ago, we wrote about the Second Circuit’s oral argument in the “flushable” hygienic wipes consumer class action cases. And now, the septic saga continues.
Ninth Circuit Endorses RICO Claims For Prescription Pharmaceutical Promotion
The Racketeer Influenced and Corrupt Organizations Act (RICO) was meant to help take down the Mafia. For years, however, plaintiffs have attempted to contort it into a federal false advertising regime for prescription pharmaceuticals, complete with treble damages and attorney’s fees. The Ninth Circuit recently gave plaintiffs a boost in that effort, permitting RICO claims to proceed against pharmaceutical companies based on allegedly improper labeling and promotion of their prescription medications.
Patterson partner and Misbranded contributor Jonah Knobler recently critiqued the Ninth Circuit’s decision—and pharmaceutical RICO suits generally—at Drug and Device Law. Check out that post here.
Joining the Trend: D.C. Circuit Latest Court of Appeals to Decline to Certify Class Containing Uninjured Members
A few weeks ago, the U.S. Court of Appeals for the D.C. Circuit weighed in on a recurring question in class action litigation: can a court certify a class where some class members—even if only a small fraction of the class—are uninjured? Joining a string of recent decisions on this subject, the circuit court held in In re Rail Freight Fuel Surcharge Antitrust Litig., 934 F.3d 619 (Aug. 30, 2019), that class certification was properly denied for lack of predominance because twelve percent of the proposed class—constituting thousands of proposed class members—were uninjured by the defendants’ alleged misconduct. This ruling follows a similar determination from the First Circuit last October, covered here. Although both cases involved antitrust allegations, their holdings are readily applicable to consumer product class actions, where there is often evidence—either from the defendants’ files or the plaintiffs’ own experts’ analysis—that a considerable number of proposed class members were uninjured by defendant’s alleged mislabeling.
In the latest development in the Lanham Act litigation between beer titans MillerCoors and Anheuser-Busch, the district court issued an order enjoining Bud Light from using the “No Corn Syrup” language and icon on product packaging, expanding the existing injunction covering the same claims in print and television advertisements. MillerCoors v. Anheuser-Busch Cos. (MillerCoors II), No. 19-cv-218-wmc, 2019 U.S. Dist. LEXIS 149954 (W.D. Wis. Sept. 4, 2019). However, the court permitted Anheuser-Busch to exhaust its existing supply of packaging with the enjoined image and language (assuming it can be done in 270 days, which Anheuser-Busch has signaled it will). The decision offers an interesting analysis of implied comparative claims and how the defendant’s replacement costs may impact the “irreparable harm” inquiry at the preliminary injunction stage.
Tough Nut to Crack: First Circuit Panel Splits on Reasonable Interpretation of Flavored Coffee Packaging
We have written previously about application of the “reasonable consumer” standard when labeling statements are claimed to be false or misleading, despite the presence of clarifying information elsewhere on the product label. We’ve observed the inconsistent standards courts apply in ruling on a motion to dismiss, particularly as to whether a “reasonable consumer” views the alleged misstatement in the context of the entire product packaging and ingredient list.
Many companies take pride in the geographic origin of their products (e.g., cars that are “Made in the USA”), or in their products’ capacity to evoke a certain region (e.g., “Hawaiian style” pizza). Claims about the origin or provenance of products seem to pose a relatively low risk of consumer deception: these typically do not implicate health or safety, nor do they convey anything concrete about the products’ qualities. Nevertheless, these “origin” and “provenance” claims have drawn scrutiny from the Federal Trade Commission, state regulators, and – most recently – class action plaintiffs’ lawyers. Below, we’ve highlighted some guidance from regulators and the courts that may be helpful to manufacturers when they consider highlighting their geographic origins in their product branding.
Cannabidiol—better known as “CBD,” a cannabis-derived compound—is one of the latest crazes in the consumer packaged goods industry. CBD sales are expected to top $5 billion in 2019—a 700% increase from 2018—and reach $24 billion in sales by 2023. Manufacturers have flooded the market with CBD-infused food, dietary supplements, cosmetics, pet food, and other animal health products. CBD is being touted as a miracle chemical compound capable of treating a host of diseases and ailments in both humans and animals, such as anxiety, depression, joint issues, digestive issues, chronic pain, ADHD, Alzheimer’s disease, cancer, and heart disease. CBD products are largely unregulated, but the days of unfettered marketing may be coming to an end: The FDA has recently taken a keen interest in CBD products, and a slew of consumer protection actions may not be far behind.
Must a Plaintiff Choose Between a UCL Claim and a Breach of Warranty Claim? Courts in California Are Split
California has long been considered a hospitable place to bring a class action, and accordingly it’s also been a popular one. But some class action plaintiffs in the Golden State have encountered an unlikely hurdle: the unavailability of equitable remedies when there is an adequate remedy at law.
Back in May, we wrote about a package of “extreme pro-plaintiff changes” that legislators had proposed to New York’s main consumer-protection statute, Gen. Bus. Law § 349. There have been some significant developments on this front, so we figured an update was in order.
Last month, Misbranded co-editors Josh Kipnees, Jonah Knobler, and Jane Metcalf presented a live-streamed webinar via Bloomberg Law titled “Hot Topics in Consumer False Advertising Litigation.” The free hour-long webinar, now available on demand, covers the following subjects, some of which should be familiar to regular readers of this blog:
- “Natural” / “no artificial ingredients” claims
- “No preservatives” claims
- Ingredient claims (“made with [X]”)
- Geographic origin claims (e.g., “Made in the USA”)
- Slack-fill claims
- Claims involving nondisclosure of morally troubling/offensive facts
- What’s next in consumer false advertising litigation?
We encourage you to check it out (and obtain some CLE credit in the process).
Breaking: Supreme Court To Decide Whether Willfulness Is Required To Disgorge Profits Under Lanham Act
Today, in its final orders list of the Term, the Supreme Court granted cert in Romag Fasteners, Inc. v. Fossil Inc. (No. 18-1233), to resolve a deep circuit split regarding Lanham Act remedies. The specific question in Romag is “[w]hether … willful [wrongdoing] is a prerequisite for an award of [the defendant’s] profits.” (All agree that an award of the plaintiff’s actual damages, as opposed to disgorgement of the defendant’s profits, is available irrespective of the defendant’s mens rea—but actual damages are often difficult to prove.) Romag presents this question in the context of a trademark infringement claim, but the outcome should also control in federal false advertising cases, which are likewise governed by the Lanham Act.
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