Joshua Kipnees, Partner

A common maxim in the service industry is that the customer always knows best. But a recent decision from the Tenth Circuit suggests that the maxim has its limits when it comes to interpreting ambiguous marketing claims.  In Bimbo Bakeries USA, Inc. v. Sycamore, the court held that the advertiser’s use of the word “local” in promoting its bread was not actionable under the Lanham Act, even though both a consumer survey and a jury of consumers had found the term to be misleading.  The decision reflects courts’ growing comfort in rejecting proffered interpretations of labeling claims as objectively unreasonable, notwithstanding evidence that certain consumers may in fact subscribe to that unreasonable interpretation.

Consumers in false-advertising cases have long targeted food packaging for purportedly misrepresenting the presence or quantity of an ingredient in a product.  These litigants typically contend that a product’s name—e.g., “All Butter Loaf Cake””—or other labeling text—e.g., “Made With Whole Grain”—creates expectations that the product be made entirely or predominantly with the advertised ingredient.  And when these products do not contain “sufficient” amounts of the advertised ingredient, consumers claim to have been deceived.  In response, manufacturers often point to the specific wording of the challenged labeling statement as well the product’s ingredient list, which details the presence and quantity of each ingredient as sufficient to dispel any unwarranted expectation.[1]

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.

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.

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.[1] 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.

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.

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.

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. 

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.

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.

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.

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.

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.

“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?

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.