State Consumer Protection Laws
The U.S. District Court for the Northern District of Illinois grants in part and denies in part defendant Kashi Sales, LLC’s motion to dismiss. Plaintiff brought fraud and consumer-protection claims based on the allegation that label-representations on Kashi brand “Mixed Berry Soft Baked Breakfast Bars, made with wildflower honey” falsely misled him into believing that the fruit filling contained more mixed berries and honey than it actually did. The court rejected Kashi’s argument that the lawsuit should be dismissed because its labeling does not mislead reasonable consumers.
Applying Bell v. Publix Super Mkts., Inc., 982 F.3d 468 (7th Cir. 2020), the court stated that, whether a label misleads reasonable consumers is a question on the merits not suitable for a motion to dismiss. The court also rejected the argument that “mixed berry” can refer only to the product’s flavor and not its ingredients. However, the court agreed that the plaintiff failed to adequately allege intent in support of his common-law fraud claim. The court reasoned that “[i]t is simply unreasonable to infer that because Kashi allegedly should have known the statements on its label were inaccurate, it intended to deceive [the plaintiff] and other consumers.” (Harris v. Kashi Sales, LLC, 2022 WL 2390933 (N.D. Ill. July 1, 2022)).
The U.S. District Court for the Northern District of California grants in part and denies in part defendant Hisamitsu America, Inc.’s motion to dismiss. Plaintiffs brought claims for, among other things, fraud and violations of California, New York, and Illinois consumer-protection statutes based on allegations that Hisamitsu’s over-the-counter “Salonpas Lidocaine Pain Relieving GelPatch” was falsely advertised as “Maximum Strength” because it contains only 4% lidocaine while competing prescription patches contain 5% lidocaine. The court held that the plaintiffs’ consumerprotection allegations satisfied Fed. R. Civ. P. 9(b)’s particularity requirement because the plaintiffs asserted that they viewed the label’s “Maximum Strength” language. Nonetheless, the court directed the plaintiffs to amend the complaint to the extent that they based their claims on other unspecified “marketing materials.” The court rejected the argument that the plaintiffs were required to allege a safety issue in order to sufficiently plead a duty to disclose. Plaintiffs appropriately alleged that disclosure was necessary to counter an affirmative misrepresentation. In addition, the court held that whether a reasonable consumer would understand “Maximum Strength” to include both over-the-counter and prescription patches is a question of fact not appropriate for resolution at the motion-to-dismiss stage. The court further held that the plaintiffs adequately alleged injury, even though they had not alleged facts showing their eligibility to use prescription-strength lidocaine patches—the only patches with a higher percentage of lidocaine than the defendant’s. It was enough that plaintiffs alleged that they paid a premium for the product because of the allegedly false representation. The economic loss rule did not bar the California plaintiffs’ fraud claim because it was based on an affirmative misrepresentation. (Hrapoff v. Hisamitsu Am., Inc., 2022 WL 2168076 (June 16, 2022)).
Consumer Class Actions
The U.S. District Court for the Northern District of California grants in part and denies in part defendant HP Inc.’s motion to dismiss the first amended complaint in a putative class action alleging that HP displays false and/or inflated reference/“strikethrough” prices for its products on its website. Specifically, the plaintiff claimed that HP purported to offer products to consumers at discounts, when in fact HP never sold its products at the higher strikethrough prices. With regard to the California False advertising Law, Unfair Competition Law, and Consumers Legal Remedies Act claims, HP moved to dismiss, arguing that the claims were subject to Fed. R. Civ. P. 9(b)’s heightened pleading standard, and that the plaintiffs did not meet the standard because they failed to plead that the strikethrough prices were not the prices at which the goods were sold in the marketplace (and not just the single retailer). Noting that this was a non-exclusive products case (meaning that more than one retailer offered the challenged product for sale), the court noted that “courts tend to reject claims unless the plaintiff establishes that the comparative reference price is misleading.” Plaintiffs failed to do so. However, with regard to the plaintiffs’ claims that challenged advertising of limited time offers, the court found their allegations sufficient and those claims could proceed. The court also dismissed the plaintiffs’ claims for negligent and intentional misrepresentation for the same reasons as the consumer-protection claims. The court denied HP’s motion to dismiss the claims for equitable monetary relief due to the Ninth Circuit’s decision in Sonner v. Premier Nutrition Corp. At the pleading stage, plaintiffs could proceed with equitable restitution claims, though the court could reconsider the issue at a later stage. (Carvalho v. HP, Inc., 2022 WL 2290595 (N.D. Cal. June 24, 2022)).
The U.S. District Court for the Eastern District of California denies the plaintiff’s motion for a preliminary injunction and provisional class certification in a putative class action alleging that the defendants’ weight loss product, “Thermofight X,” did not deliver on advertised benefits, and also, had auto-billing practices that constituted unlawful automatic renewals under California law. The court, first, found that the plaintiff had failed to show that she and the public would be likely to suffer irreparable harm absent injunctive relief. Specifically, the “plaintiff did not attest in a declaration, or provide other competent evidence, showing that she faces any currently ongoing or future irreparable harm.” While the plaintiff had filed certain declarations, those addressed possible harms that the public might face from the weight loss products and auto-billing practices, but those harms were speculative and not specific to the plaintiff herself, and the declarations did not address harm she suffers or will suffer. Nor did the other evidence that the plaintiff proffered demonstrate irreparable harm. Specifically, references to FDA websites and enforcement letters were unhelpful because they did not refer to the defendants’ products specifically. What’s more, the plaintiffs own allegations themselves demonstrated only that she had alleged a past monetary injury. Finally, the plaintiff’s argument that there is irreparable harm because there is a general right of the public to be free from “fraud, deceit, and unlawful conduct” was unsupported by authority and did not show how injunctive relief was necessary to preserve the status quo before a trial on the merits of the action. The court addressed the plaintiff’s argument that she need not show irreparable harm when an injunction is sought to prevent a violation of a statute that specifically provides for injunctive relief, and rejected it, stating that federal law applied, and, even if the court could apply the federal framework to a state statute, the California consumer protection laws do not indicate that “they were intended to create a statutory presumption or categorical rule for issuing injunctive relief when violations are established.” (Brooks v. It Works Mktg., Inc., 2022 WL 2217253 (E.D. Cal. June 21, 2022)).
The U.S. District Court for the Southern District of New York grants in part and denies in part defendant Unilever U.S., Inc.’s motion to dismiss the plaintiff’s putative class action complaint. Unilever, the maker of the “Dove” brand “Deep Moisture Bodywash,” was accused of making deceptive and misleading representations on its bodywash labeling, including the following statements: “skin-natural nourishers”; “deep moisture”; “instantly soft skin, lasting nourishment”; “moisture renew blend”; and “nourishing body wash.” On the back label, the statement titled “The Dove Difference” explained: “Our moisturizing and microbiome gentle formula provides instant softness and lasting care for your skin,” with a graphic stating “microbiome gentle.” The label included more representations about the microbiome, including, “Start your year with a healthy microbiome”; “Your microbiome is a protective layer that helps keep skin healthy, moisturized[,] and resilient. Wash gently and revitalize skin with microbiome-gentle Dove”; and “What you eat isn’t the only thing that may affect your skin’s microbiome–skin’s living protective layer.” Plaintiff alleged that these representations lead consumers to believe that the product will keep their skin’s microbiome in an optimum state to protect the skin, when, in fact, the product was not actually microbiome gentle because it contained ingredients that trigger negative skin reactions and which are incompatible with maintaining a balanced microbiome. Plaintiff further claimed that Unilever’s product representations created the expectation that the product contains 100% natural ingredients because consumers believe that synthetic ingredients are harmful to the skin’s microbiome; in reality, according to the complaint, the product did not actually contain 100% natural ingredients. Plaintiff claimed that Unilever’s misrepresentations violated Sections 349 and 350 of New York General Business Law (“GBL”), and constituted negligent misrepresentation and fraud. First, as to the GBL claim, Unilever argued that no reasonable consumer would find its representations misleading, and specifically, argued that reasonable consumers would understand that stating that the product was “microbiome gentle” meant that the product as a whole was microbiome gentle, not that each constituent ingredient was microbiome gentle. The court found that this representation was “capable of two possible reasonable interpretations” and it was not “patently implausible” for a reasonable consumer to conclude that a microbiome gentle formula is made up of only microbiome gentle ingredients. Therefore, the court concluded that whether the representation was materially misleading is a question of fact that cannot be resolved on a motion to dismiss. The court noted that Unilever’s arguments on this point were focused more on whether the representations were truthful, and the court pointed out that the relevant question is not whether the product representations are correct, but rather, whether a reasonable consumer might be misled. Lastly, Unilever argued that any ambiguity resulting from the phrase “microbiome gentle” was resolved by reference to the product’s ingredient list, relying on case law supporting the notion that deception can be cured by a disclaimer. However, the court found it untenable that the ingredient list could serve as a disclaimer because it would require that a reasonable consumer be familiar with the many scientific ingredients listed, as well as those ingredients’ properties, origins, and effects on the skin. The court plainly rejected this argument. Moreover, the court held that the plaintiff’s allegation that she would have paid less for, or not purchased, the product had she known it was not microbiome gentle, was sufficient to plead a price premium theory of injury to withstand Unilever’s motion to dismiss. While Unilever argued that the plaintiff’s allegations as to her price premium theory of injury were merely boilerplate recitations of the formula for calculating a price premium, the court held that none of the authority that Unilever cited supported such a conclusion. Therefore, the court held that the plaintiff adequately pled each element of her deceptive labeling claims under GBL Sections 349 and 350, and denied Unilever’s motion to dismiss this claim. Second, the plaintiff’s claim for negligent misrepresentation required a showing that (1) the defendant had a duty as a result of a special relationship to give correct information; (2) the defendant made a false representation that it should have known was incorrect; (3) the information supplied in the representation was known by the defendant to be desired by the plaintiff for a serious purpose; (4) the plaintiff intended to rely and act upon it; and (5) the plaintiff reasonably relied on it to her detriment. The parties dispute whether a special relationship existed under the first element of the claim. The court agreed with Unilever that the plaintiff made no allegations suggesting any unique or special circumstance to depart from the general rule that the special relationship cannot be based solely on a defendant’s status as a manufacturer. Therefore, the court dismissed the negligent misrepresentation claim. Finally, the plaintiff brought a fraud claim, which requires allegations of (1) a material misrepresentation, (2) made with knowledge of its falsity, (3) with an intent to defraud, and (4) reasonable reliance on the part of the plaintiff, (5) that causes damage to the plaintiff. The court agreed with Unilever that the plaintiff’s vague allegation that she relied on Unilever’s representations about the product likely were insufficient under Fed. R. Civ. P. 12(b)(6), or certainly under Rule 9(b). However, the court did not even address that question because it found the complaint devoid of sufficient allegations as to scienter – that Unilever should have known its allegedly false representations were incorrect. Therefore, the court dismissed the fraud claim as well. (Anderson v. Unilever United States, Inc., 2022 WL 2181575 (S.D.N.Y. June 16, 2022)).
The U.S. District Court for the Central District of California largely denies Texas-based defendant Taylor James LLC’s motion to dismiss an amended nationwide consumer class action complaint alleging, under California consumer protection laws, that 35 of the defendant’s “Reef Safe” sunscreen products were falsely advertised because they contain compounds (avobenzone and octocrylene) that are banned in some coastal areas as harmful to coral reefs and marine life. The court rejected the defendant’s arguments that the court did not have personal jurisdiction over defendant as to the nationwide class claims (the issue should await class certification) or that plaintiff did not have standing to raise claims on behalf of the putative class (allegations that plaintiff would not have purchased the product were sufficient). The court deferred for class certification whether unpurchased challenged product were similar enough to the purchased challenged product to be included in the lawsuit. The court also deferred for class certification whether non-resident putative class members can assert claims under California’s consumer protection laws. The court ruled that the plaintiff’s allegations met the particularity requirement of Fed. R. Civ. P. 9(b), that the allegations of falsity of the Reef Safe representations were sufficiently plausible, and that the reasonable consumer could be plausibly deceived in the manner alleged. The court dismissed without prejudice the plaintiff’s claim for injunctive relief because she did not allege sufficiently an inadequate remedy at law or an intent to buy the products in the future. (Battle v. Taylor James, LLC, 2022 WL 2162930 (C.D. Cal. June 15, 2022)).
Federal Trade Commission (FTC) Litigation Decisions
The U.S. District Court for the District of Utah grants in part and denies in part the parties’ crossmotions for summary judgment. The Federal Trade Commission (“FTC”) and Utah Division of Consumer Protection (“UDCP”) brought an enforcement action against the defendant-company for allegedly violating Section 5 of the FTC Act, the Telemarketing Sales Rule (“TSR”), and several Utah consumer protection statutes for selling “various real estate training programs and services” to U.S. consumers until December 2019. First, the court denied the cross-motions with respect to the plaintiffs’ allegations that the company made misrepresentations on likely earnings to purchasers at preview events and through telemarketing due to a genuine dispute on the net impression of the company’s statements and representations. Second, the court granted the plaintiffs’ motion with respect to their allegations of misrepresentations regarding the company’s training programs (i.e., access to the company’s funding network, the company’s methods and tools to find discounted properties, and access to cash buyers for wholesale flips), but denied the defendant’s motion with respect to other alleged misrepresentations (i.e., personalized assistance from the company’s “top investors” or “experts,” and certain representations about investments and properties made at investor expos and buying summits). Third, the court denied the crossmotions with respect to the plaintiffs’ allegations that the company made misrepresentations on why it requested and how it used consumers’ financial information, as well as why certain customers were referred to third-party companies for additional capital or credit. Fourth, the court denied the defendant’s motion with respect to the UDCP’s claim of an unconscionable act or practice under the Utah Consumer Sales Practices Act (“UCSPA”). Fifth, the court found that the plaintiffs were entitled to summary judgment under the TSR and Utah’s Telephone Fraud Prevention Act (“TFPA”) for the company’s false or misleading representations regarding its oneon-one coaching programs. Finally, the court concluded that the UDCP was entitled to summary judgment for its Business Opportunity Disclosure Act (“BODA”) claims, as the company was subject to BODA and “did not fulfill BODA’s requirements.” With respect to remedies, the court denied the cross-motions on whether the FTC is entitled to consumer redress under Section 19 of the FTC Act due to the parties’ disagreement on whether the “misrepresentations during telemarketing calls were ‘widely disseminated.’” And the court granted the defendant’s motion with respect to the UDCP’s claims for disgorgement, civil penalties, and fines for conduct that were time-barred by the statute of limitations for the UCSPA and TFPA. However, the court acknowledged that any time-barred violation “remains relevant to determining fines for violations that occurred after that date to the extent they are based on the same conduct[,]” and that the UDCP may recover actual damages for “consumers who complained to the [UDCP] within a reasonable time after it instituted” the instant litigation. (FTC v. Nudge, LLC, 2022 WL 2132695 (D. Utah June 14, 2022)).
Recent Filings
Putative nationwide class action filed in the U.S. District Court for the Central District of California against Walmart Inc., alleging violations of California’s False Advertising Law, Unfair Competition Law, and Consumers Legal Remedies Act. According to the complaint, the defendant’s labeling of its “Great Value” brand trash bags as “recycling” bags is misleading. Plaintiff asserts that the trash bags are non-recyclable as they are made from low-density polyethylene plastic and contaminate the recyclable waste stream, as well as decrease the recyclability of otherwise recyclable materials. Plaintiff alleges that, but for the misleading label, fewer consumers would purchase the products or pay the premium price. (Millam v. Walmart Inc., No. 22-cv-1090 (C.D. Cal. filed July 1, 2022)).
Putative nationwide class action filed in the U.S. District Court for the Central District of California against Beyond Meat Inc., alleging violations of California’s False Advertising Law, Unfair Competition Law, and Consumers Legal Remedies Act. According to the complaint, the defendant’s labeling of its “Beyond Meat” products is misleading. Plaintiff claims that the labeling overstates the content, quality, and benefits of protein in Beyond Meat products. Plaintiff further asserts that the product label uses false claims, including “All Natural” and “Organic,” when, in fact, the products contain synthetic ingredients. (DeLoss v. Beyond Meat Inc., No. 22-cv-4405 (C.D. Cal. filed June 28, 2022)).
Putative nationwide, multistate, and California class action filed in the U.S. District Court for the Northern District of California against Ancient Organics LLC, claiming that the company violated California’s Unfair Competition Law and Consumers Legal Remedies Act. According to the complaint, the defendant falsely advertises that its products are healthy despite containing “high amounts of unsafe fats which increase the risk of severe health issues.” (Effinger v. Ancient Organics LLC (N.D Cal. filed June 17, 2022)).
Putative nationwide, multistate, and California class action filed in the U.S. District Court for the Northern District of California against Talking Rain Beverage Company, asserting that the company violated various Washington State and California consumer protection laws. According to the complaint, the defendant falsely labels its soft drink products as “premium, naturallyflavored beverages containing only natural flavors” despite containing “undisclosed artificial flavoring.” (Tatum v. Talking Rain Beverage Co., Inc. (N.D Cal. filed June 15, 2022)).
