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.
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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.
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.
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.
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.
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.
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.”)
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.
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.
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.
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.
A frequent target of consumer class actions are “structure/function” claims made in connection with dietary supplements. These claims describe a nutrient or dietary ingredient and its role in the body’s structure or function: for example, “glucosamine promotes healthy joints.” Plaintiffs may allege that a product’s labeling is misleading because the typical consumer already receives enough of the nutrient or ingredient from her diet. At the same time, those plaintiffs will seek a refund on behalf of everyone who bought the product—even if many in the class have received a benefit. A recent decision out of the Southern District of California, Alvarez v. NBTY, Inc., 2019 U.S. Dist. LEXIS 87420 (May 22, 2019), suggests that this disconnect between the proposed class and the plaintiffs’ theory of liability and damages may no longer be tolerated at the class-certification stage.
Consumer class actions involving goods regulated by the Food and Drug Administration (“FDA”) coexist in parallel with FDA enforcement efforts. Consumers have no private right of action to enforce the Food, Drug, and Cosmetics Act—the statute the FDA is charged with implementing—and attempts to use state consumer protection laws that interfere with the FDA’s regulatory regime are preempted. Even so, private litigants often invoke FDA guidance, rules, and statements regarding labeling practices as evidence that a manufacturer’s marketing claims are—or are not—susceptible to challenge as deceptive advertising under state law.
“Contains detectable levels of the weed-killer chemical glyphosate.”
“Contains limonene, which causes kidney toxicity and tumors, and linalool, a cockroach insecticide.”
“Contains a potent biocide and endocrine disruptor, with detrimental health effects that are still becoming known.”
These are the sorts of headline-grabbing allegations the plaintiffs’ bar has recently relied upon in claiming that products advertised or positioned as “natural” are deceptively marketed. At first blush, the presence of allegedly dangerous ingredients in foods, cosmetics, and other consumer products might seem like the basis of a strong false advertising case—especially when those substances are undisclosed. How could a company so deceive the public by promising a “good-for-you” product that contains such “bad” ingredients?
As astronomer Carl Sagan famously said, “absence of evidence is not evidence of absence.” Plaintiffs have not gotten the message. They often allege that a defendant’s marketing or labeling statements are false and misleading on the sole basis that there is purportedly no evidence (or insufficient evidence) proving their truth. These so-called “lack of substantiation” claims are easy to plead because a plaintiff does not need to conduct an investigation to identify evidence that the challenged statement is false. Rather, she alleges only an absence of supporting evidence for the statement—and generally, in a conclusory manner.
In Comcast v. Behrend, 569 U.S. 27 (2013), the Supreme Court held that a plaintiff cannot obtain class certification with an inadequate damages model. In the years since, courts have diverged over how much a plaintiff must do to satisfy this requirement. Often, plaintiffs seek class certification with nothing more than a skeletal proposal to develop and perform an analysis at some future point, using information they do not—and might never—possess. While some courts have found such adumbrative “models” sufficient at the class certification stage, the better decisions require more. As Comcast recognizes, Rule 23 “does not set forth a mere pleading standard.” Rather, a plaintiff “must affirmatively demonstrate” through “evidentiary proof” that damages are measurable on a class-wide basis through a common methodology. Faithful application of that principle obligates plaintiffs and their experts to offer a detailed methodology that is tailored to the facts of the case, and to show that any data that the model requires in fact exists and can be obtained.
Over the last few years, “conjoint analysis” has become the methodology du jour for false advertising plaintiffs seeking to demonstrate they can calculate class-wide damages. Conjoint analysis is so named because it is used to study the joint effects of multiple product attributes on consumers’ choices. At bottom, conjoint analysis uses survey data to measure the strength of consumers’ preferences for particular product features. Or, put differently, it tries to isolate how much people care about an individual product attribute in a multi-feature product (in a more scientific manner than just asking them directly).