The U.S. District Court for the Western District of Washington dismisses without prejudice and with leave to amend a Lanham Act false advertising counterclaim brought by one of the defendants against the plaintiff. Defendant alleged that the plaintiff made false and misleading factual statements in advertisements about the plaintiff’s real estate products, services, and commercial activities. Further, according to the counterclaims, the challenged statements on the plaintiff’s website—e.g., the innovativeness of the plaintiff’s technology; whether plaintiff’s “clients pay buyer-agent commission fees”; and the defendant’s alleged anticompetitive policies that artificially inflate real estate transaction fees—damaged the defendant’s goodwill and reputation. Plaintiff contended that the defendant lacked standing under both Article III and the Lanham Act, and could not use the Lanham Act as a vehicle to chill its “constitutional right to challenge conduct it believes harms consumers.” With respect to standing, the court granted the plaintiff’s motion to dismiss the counterclaim because the defendant failed to demonstrate injury in fact with sufficient concrete and particularized reputational harm under Article III, and did not allege that either brokers or consumers withheld any trade with it under the Lanham Act. The court, however, disagreed with the plaintiff’s contention that its website included “non-commercial statements of opinion” protected under the First Amendment. Specifically, the court found that the defendant’s counterclaim plausibly alleged that the plaintiff made false statements in commercial advertising about the defendant’s supposed anticompetitive conduct, and that those statements were not protected under the Noerr-Pennington doctrine for being related to petitioning activity with the government. Although dismissing the counterclaim, the court exercised its discretion and granted the defendant leave to amend it. (REX - Real Est. Exch., Inc. v. Zillow, Inc., 2022 WL 1203742 (W.D. Wash. Apr. 22, 2022)).
State Consumer Protection Laws
The U.S. Court of Appeals for the Ninth Circuit certifies to the Washington State Supreme Court a question relating to whether a consumer suffers “ascertainable loss” within meaning of Oregon’s Unlawful Trade Practices Act (“UTPA”). Plaintiff bought garments from defendant Eddie Bauer’s outlet stores advertising sales of 40–70% off. The price tags of the garments included two numbers: a higher price (“list price”) and a lower “sale” price. Plaintiff paid the “sale” price for the clothes. She alleged that she relied upon the representation that she was getting the clothes on sale, but later discovered that the “list prices” were misleading because Eddie Bauer never sold some of the garments for the “list price,” and that the outlet stores have perpetual sales of 40–70% off. The district court granted the defendant’ s motion to dismiss with prejudice, holding that the plaintiff failed to plead that she suffered an “ascertainable loss of money or property” due to alleged unlawful trade practices. The district court reasoned that the plaintiff failed to provide any cases recognizing an “ascertainable loss” under the UTPA “based solely on a plaintiff’s failure to get as good of a deal as the plaintiff anticipated.” Relying primarily on Pearson v. Philip Morris, Inc., 361 P.3d 3 (Or. 2015), the district court concluded that “[s]ome misstatement as to a characteristic, quality, or feature of the product is required.” Plaintiff argued that the district court erred by reading Pearson too narrowly. Plaintiff also argued that she adequately pleaded an ascertainable loss under two additional theories. Under an “advantageous bargain theory,” the plaintiff claimed that she suffered an “ascertainable loss” because she lost out on the “advantageous bargain” that she would acquire by purchasing clothes at a significant discount of their regular selling price. Additionally, the plaintiff claimed that she paid more for the clothes than she otherwise would have because of “inflated consumer demand” (the “inflated consumer demand theory”). The court in Pearson held that if a consumer alleges that the purchase price of a product he purchased satisfies the “ascertainable loss” requirement of the UTPA on the theory that the consumer would not have purchased the product but for a misrepresentation about the “characteristics” of the product, then the consumer must establish that she relied on the misrepresentation about the “characteristics” of the product when she purchased it. Here, the plaintiff alleged that she would not have purchased the garments but for the alleged violations of the state statute, which do not involve misrepresentations about a product itself. The Ninth Circuit explained that a violation of the UTPA could arise from a representation about the product’s price, comparative price, or price history. Even though the plaintiff had not presented any case recognizing an “ascertainable loss” in the form of the purchase price, the Ninth Circuit opined that such theory of loss is not precluded by Pearson. The Ninth Circuit, however, invited the Oregon Supreme Court to determine in the first instance whether Oregon law recognizes such a theory of “ascertainable loss.” (Clark v. Eddie Bauer LLC, 30 F.4th 1151 (9th Cir. 2022)).
The U.S. District Court for the Northern District of California grants in part and denies in part defendant BA Sports Nutrition, LLC’s motion for summary judgment. Defendant is a sports drink company that produces and sells “BodyArmor SuperDrink” sports drinks, advertising that these sports drinks provide “superior hydration”; the drink labels also contain the words “SUPERIOR HYDRATION.” The drinks’ labels contain images of fruits, the words “natural flavors and sweeteners,” and advertise that the products contain “electrolytes,” “antioxidants,” and various vitamins. Plaintiffs, who were “sports enthusiasts,” purchased and consumed the defendant’s sports drinks believing that the drinks were healthy and would benefit their workouts as compared to other sports drinks. After the court dismissed the “superior hydration” claims with leave to amend, the plaintiffs’ theory shifted to focusing on the fruit-based labeling on the drinks and an objective health benefits tied to hydration. In response to the defendant’s motion for summary judgment, the court, first, ruled that the plaintiffs’ hydration-related claims did not survive, because their deposition testimony showed that they did not rely on and were not deceived by any representations regarding hydration. Instead, the plaintiffs testified that hydration “wasn’t even a thought” when they first purchased the drinks. Similarly, the court determined that the plaintiffs’ sugar claims did not survive, because they testified that they had long been aware that sugar was unhealthy, but they knew that the defendant’s sport drinks contained sugar when they purchased the products. However, the court held that the plaintiffs’ fruit-related claims survived summary judgment based on their testimony that the fruit images on the labels drew them to the product and were part of the reason they purchased the drinks, that they thought fruit was healthy, and that they thought that the fruit flavors of the drinks were “natural” and, therefore, came from fruit. The court next reasoned that the plaintiffs’ California Unfair Competition Law claim could not be premised on a violation of a FDA regulation because the unrebutted declaration of a beverage industry consultant established that no sports drinks contained fruit or fruit juice prior to 2019. The court further reasoned that the plaintiffs’ fruit-related claims were not preempted by the federal Food, Drug, and Cosmetics Act because the plaintiffs were not challenging any express or implied statements about the level of a nutrient; instead, they were challenging the pictures of fruit and the names of the drinks. Finally, the court instructed that, in light of its summary judgment order that narrowed the case, the parties were directed to cooperate with each other and to work with the special master to determine what outstanding discovery remains relevant. (Silver v. BA Sports Nutrition, LLC, 2022 WL 1288982 (N.D. Cal. Apr. 29, 2022)).
The U.S. District Court for the Southern District of New York grants Defendant Allbirds, Inc.’s motion to dismiss the plaintiff’s amended complaint. Allbirds manufactured and sold shoes made from wool through its website, brick and mortar stores, and third-party vendors, and makes various environmental, sustainability, and animal welfare claims in its advertising. Some examples included: “Low Carbon Footprint”; “Environmentally Friendly”; “Made with Sustainable Wool”; “Reversing Climate Change”; “Our Sustainable Practices”; and “Our Sheep Live the Good Life.” Allbirds used a life cycle assessment (“LCA”) tool to measure its products’ carbon footprint, and uses the Higg material sustainability index (“Higg MSI”) to measure the environmental impact of its apparel materials. Plaintiff’s first cause of action arose under New York General Business Law (“GBL”) §§ 349 and 350, which prohibit deceptive acts or practices and false advertising in the conduct of any business, trade, or commerce. Plaintiff took issue with the LCA tool and Higg MSI, criticizing the tools’ methodology. However, the court noted that the plaintiff did not allege that Allbirds’ calculations were wrong or that Allbirds falsely described the way it undertook those calculations, and held that the plaintiff’s issues with the methodology of those tools “does not plausibly suggest that what Defendant in fact says is materially misleading.” Further, the court held that Allbirds “does not mislead the reasonable consumer because it makes clear what is included in the carbon footprint calculation, and does not suggest that any factors are included that really are not.” Plaintiff also argued that Allbirds improperly omitted information relating to the environmental impact of the wool industry’s methane emissions, land occupation, and eutrophication. Importantly, however, the court noted that a claim for omission is only plausible where the business alone possesses material information relevant to consumers and fails to provide it, and the court held that there is no obligation under GBL §§ 349 and 350 to provide “whatever information a consumer might like to know.” As to the plaintiff’s issues with animal welfare claims, the court found that the plaintiff failed to identify any misstatement in any advertisement that would deceive consumers. Rather, “Plaintiff criticizes the sheep industry and wool harvesting practices as a whole, which does not satisfy Plaintiff’s burden to allege that a specific advertisement or statement by Defendant would mislead a reasonable consumer as to the Product.” Specifically, the plaintiff’s allegations did not suggest that the sheep where Allbirds’ wool came from were treated cruelly, and while the plaintiff alleged that the sheep did not receive individual care, the court stated that no reasonable consumer would expect farm animals to receive such care, and the lack of individual care hardly showed inhumane treatment. Additionally, the court held that the claim “Our Sheep Live the Good Life” with depictions of “happy” sheep in “pastoral settings” are classic non-actionable puffery. Plaintiff also brought claims for, among other things, common law fraud, premised on the assertions that Allbirds’ environmental and animal welfare claims were materially misleading. Because the court already determined that the plaintiff failed to allege the advertisements were misleading, the court dismissed these claims for the same reasons, as well as for the fact that these claims were inadequately plead. More specifically, the court dismissed the fraud claim because the plaintiff did not plead plausible facts to conclude that Allbirds made a materially false statement or omission, and did not plead fraudulent intent. (Dwyer v. Allbirds, Inc., 2022 WL 1136799 (S.D.N.Y. Apr. 18, 2022)).
Consumer Class Actions
The U.S. District Court for the Northern District of California grants in part and denies in part defendant Bondi Sands (USA) Inc.’s motion to dismiss. Plaintiff brought a putative class action against the defendant, alleging, among other things, violations of California’s Unfair Competition Law, False Advertising Law, and Consumers Legal Remedies Act, claiming the label on one of the defendant’s sunscreen products included the phrase “Reef Friendly,” when, in fact, the product contained chemical ingredients that, according to the plaintiff, were unsafe for reefs. The court ruled on several points, first denying the defendant’s motion to invoke the primary jurisdiction doctrine, noting that efficiency is the deciding factor in such a determination and that this court was competent to make a ruling on the issues at hand. The court, then, denied in part the defendant’s motion to dismiss based on the Food, Drug, and Cosmetic Act (“FDCA”) preemption, noting that the “FDA’s regulations governing OTC sunscreen do not currently address environmental claims,” thus, there was no state requirement preempting an FDCA requirement. The court, next, found that the plaintiff had succeeded in stating a claim upon which relief may be granted, and that her proposed evidence that the chemicals were dangerous to the reef was enough to allege a misrepresentation claim based on the product’s claim of being “Reef Friendly.” In addressing the defendant’s motion to dismiss the equitable claims, the court granted the motion only in part. The court stated that, although her present allegations based on a lack of expert discovery and potential entitlement to restitution, but not damages, were insufficient to support equitable relief, “claims for monetary equitable relief would not necessarily redress prospective harm” and may not ensure that plaintiff could rely on the defendant’s future representations. Therefore, plaintiff was allowed leave to amend. Finally, the court determined that plaintiff had successfully alleged facts to show standing, holding that she cited to an injury-in-fact to pursue damages. The court rejected the defendant’s argument that “a plaintiff could avoid future deception by reviewing an ingredients list.” A determination of whether the ingredients in the product were safe or unsafe for reefs was not as simple as reading an ingredient list, but would instead require “specialized knowledge, skill, experience, or education in sun care products,” something that an average consumer would not possess. Therefore, the court found that the plaintiff would not be able to determine if the defendant’s products were safe and, thus, could suffer a similar future harm. (Moran v. Bondi Sands Inc., 2022 WL 1288984 (N.D. Cal. Apr. 29, 2022)).
The California Court of Appeal affirms denial of the plaintiffs’ class certification motion in an action brought under California consumer protection laws alleging that defendants Foster Poultry Farms, Ralphs Grocery Company, and The Vons Companies falsely advertised “Foster Farms” fresh poultry products by understating the amount of retained water in the products. Retained water is water added to the poultry during processing (associated with pathogen reduction) that is retained in the product at the time of packaging. Because the price of poultry includes this added water (dry tare), federal law requires that poultry processors declare on the front label the percentage of the net weight of the product that is made up of retained water. Plaintiffs alleged that the products had more retained water than was declared on the label. In three successive demurrers at the outset of the case, the defendants argued that the determination of the amount of retained water is regulated under the federal Poultry Products Inspection Act (“PPIA”), that the PPIA requires poultry processors to prepare and submit a written retained water protocol that details a method to determine retained water, that Foster Farms did so, and that the written retained water protocol was approved by the Food Safety Inspection Service (“FSIS”) of the United States Department of Agriculture (“USDA”). Pursuant to the PPIA and the approved retained water protocol, Foster Farms was required to determine retained water via oven drying testing. In their demurrers, the defendants argued that plaintiffs’ theory of deception was based on measuring retained water in ways other than oven drying testing and, under the PPIA, the plaintiffs’ attempts to impose a different retained water determination method was expressly preempted. Based on the plaintiffs’ representation that they would not pursue a preempted theory, the court overruled the third demurrer, but it limited the case to challenging the determination of retained water as it is required to be determined under the PPIA. Following full discovery, the plaintiffs filed a motion for class certification. Defendants opposed the motion by pointing out that the plaintiffs were attempting to certify a consumer class under a preempted theory that was no longer part of the case because it was based on a determination of retained water via a manner other than oven drying testing. The trial court denied class certification, ruling that it would not certify a class on a preempted theory that had been rejected in the demurrer proceedings. On appeal, the plaintiffs argued that the trial court engaged in an improper merits inquiry, ignored the specific class certification criteria under Cal. Code of Civil Procedure § 382 (general class certification requirements) and Cal. Civil Code § 1781 (class requirements of the Consumers Legal Remedies Act), and violated the plaintiffs’ due process by requiring them to proceed on a non-preempted theory without providing them the opportunity to do so. The Court of Appeal affirmed, rejecting each of the plaintiffs’ arguments. The Court of Appeal ruled that the trial court’s decision was reviewed for abuse of discretion and the trial court did not abuse its discretion in refusing to certify a class on a theory that had been previously rejected by the court as legally insufficient. Rather than engaging in an improper merits determination, the trial court merely observed that the plaintiffs’ theory already had “been weeded out as legally meritless” and concluded that the plaintiffs’ evidence of alleged excessive retained water did not measure retained water in a permissible, non-preempted manner. That, in turn, was entirely appropriate because “a court must determine whether the elements necessary to establish liability are susceptible to common proof.” To complete that task, a trial court is “entitled to . . . weigh evidence for the purpose of determining whether the class certification requirements, namely predominance, [a]re met,” and the court is “not required to simply accept plaintiffs’ mere assertion” in that regard. The trial court was acting within its discretion when it found that plaintiffs’ “common theory of proof had no foundation in the evidence.” While “the order does not include specific findings on each of the class criteria, the record discloses that the certification dispute turned on the element of predominance.” That’s sufficient and any failure to specifically analyze Civil Code § 1781 in the order was, at most, nonprejudicial error. Finally, it was the plaintiffs that raised a new theory of liability in the class certification proceedings (after realizing that the theory they briefed could not support certification) and they could not blame the trial court for not getting an opportunity to develop a theory not included in their certification motion. (Wong v. Foster Poultry Farms, 2022 WL 1210445 (Cal. Ct. App. Apr. 25, 2022)).
The U.S. District Court, Southern District of New York grants in part and denies in part defendant Hillshire Brands Company’s motion to dismiss a putative class action complaint alleging that the defendant falsely advertised its “Delights English Muffin” product as made only or predominantly with whole grain. The product’s front label stated, “MADE WITH WHOLE GRAIN.” Whole grain was among the ingredients in the English Muffin, but the primary grain ingredient was enriched wheat flour. The court concluded that the plaintiff sufficiently alleged that the product’s packaging was deceptive or materially misleading for purposes of New York General Business Law §§ 349 and 350. Applying the Second Circuit’s decision in Mantikas v. Kellogg Co., 910 F.3d 633 (2d Cir. 2018), the court concluded that a reasonable consumer would understand “made with whole grain” to mean that English muffin comprises predominantly whole grains. Even though the product was made with some quantity of whole grains, the “made with whole grain” claim was accompanied by an asterisk, and the ingredient list accurately disclosed enriched wheat flour as the first ingredient, such facts did not render the plaintiff’s claim of consumer deception implausible. In addition, the court held that the plaintiff sufficiently alleged injury by asserting that he would not have purchased the product or would have paid less for it had he known whole grains were not the predominant grain ingredient. According to the court, “neither Plaintiff’s failure to identify the prices of competing products,” “nor his failure to identify which of the manufacturer or retailer set the price of the product” was fatal at the pleadings stage. However, the court dismissed the plaintiff’s negligent misrepresentation claim because the relationship between an ordinary buyer and seller is not a special relationship giving rise to a duty to speak. In addition, the court dismissed the plaintiff’s common law fraud claims for failure to plead fraudulent intent. Finally, the court concluded that the plaintiff lacked Article III standing to seek injunctive relief because he was now aware of the allegedly deceptive packaging and could identify the flour ingredients in the ingredient list, and cannot show an imminent risk of future injury. (Wargo v. Hillshire Brands Co., 2022 WL 1204652 (S.D.N.Y. April 22, 2022)).
The U.S. District Court for the Central District of California grants in part and denies in part the plaintiff’s motion for class certification and denies the defendant’s motions to exclude the plaintiff’s experts. Plaintiff brought a putative class action against the defendant marketer of dietary supplements, alleging that the defendant falsely claimed the supplements’ effectiveness for weight management and appetite control, even though the supplements’ only active ingredients (Hydroxycitric Acid and extra virgin organic coconut oil) were incapable of providing weight loss benefits. Plaintiff asserted claims for, among other things, violations of California’s Unfair Competition Law (“UCL”), False Advertising Law (“FAL”), Consumers Legal Remedies Act (“CLRA”), and common law negligent misrepresentation. Pursuant to Fed. R. Civ. P. 23(b)(3), the court certified two classes, a nationwide class and a California sub-class, of persons who purchased the supplement labeled “weight management” and/or “appetite suppression” for personal and household use, and did not receive a refund. In certifying the class, the court found that, even though the product labels varied during the class period, they always contained at least one of the contested statements, thus, consumers were exposed to substantially similar product labels such that there were common legal or factual issues to be determined (satisfying the commonality requirement of Rule 23(a)(2)). With respect to “typicality, the court held that the plaintiff’s claim that she purchased the product based on the contested statements was based on the same facts and same legal and remedial theories as the rest of the class members, even if the labels varied slightly. The court further found that common issues of law and fact predominated over any individualized questions because there were classwide questions as to whether the contested statements were material misrepresentations. Specifically, the Court held that the plaintiff put forth sufficient evidence that consumers were exposed to the contested statements during the relevant time period, and a consumer’s understanding of the phrases “weight management” and “appetite control” is susceptible to common proof. Even if consumers purchasing the product were influenced by factors other than the label, contested labeling statements that go to the efficacy of the product nonetheless remained material. The court, however, did exercise its discretion to limit the class period to four years prior to the filing of the action, which was the longest statute of limitations at issue. While the defendant argued that the class was not ascertainable, the court noted that the Ninth Circuit has declined to adopt an ascertainability or administrative feasibility requirement for class certification. Further, the court modified the class definitions to address the defendant’s concerns about class members who purchased the product outside of the class period, had not been exposed to any of the contested statements, or had already received a refund or returned the supplement. On these findings, and after modifying the class definition, the court granted in part the motion for class certification.
(Capaci v. Sports Research Corp., 2022 WL 1133818 (C.D. Cal. Apr. 14, 2022)).
Recent Filings
Putative California class action filed in the U.S. District Court for the Northern District of California against the Target Corporation, claiming that the company violated the Magnuson-Moss Warranty Act, and California’s False Advertising Law, Consumers Legal Remedies Act, and Unfair Competition Law. According to the complaint, the company misleadingly advertises its “Lidocaine Patches” as providing “pain-relief” using a “maximum strength” dose of lidocaine for “up to 8 hours,” even though the patches regularly peel off consumers’ bodies within a few hours after being properly applied. (Ary, et. al v. Target Corp. (N.D. Cal. filed Apr. 29, 2022)).
Putative California class action and nationwide class action filed in the U.S. District Court for the Northern District of California against Iovate Health Sciences claiming that the company violated California’s False Advertising Law, Consumers Legal Remedies Act, and Unfair Competition Law, among other things. According to the complaint, the company deceptively sells its supplements in oversized packaging even though the products only fill half of the packages. (Green, et. al v. Iovate Health Sciences U.S.A. Inc. (N.D. Cal. filed Apr. 28, 2022)).
Putative nationwide class action filed in the U.S. District Court for the Middle District of Florida against Pete and Gerry’s Organics, LLC, alleging violations of Florida’s False and Misleading Advertising Law and Deceptive and Unfair Trade Practices Act. According to the complaint, the defendant’s labeling of its “Nellie’s Free Range Eggs” products as “Free Range” eggs from hens raised in humane living conditions is misleading because the hens are crammed into sheds that prevent them from extending their wings or being in outdoor space. Plaintiff alleges that she would not have purchased the eggs had she known that the products were not as advertised. (Dean v. Pete and Gerry’s Organics, LLC, No. 22-cv-806 (M.D. Fla. filed Apr. 27, 2022)).
Putative nationwide class action filed in the U.S. District Court for the Eastern District of New York against R.T.G. Custom Supply LLC, alleging violations of the Washington Consumer Protection Act. According to the complaint, the defendant’s labeling of its disposable cutlery products manufactured with “EcoPure” technology as “biodegradable” is misleading because the products cannot decompose within five years in a landfill. Plaintiff and Class members allege that absent the defendant’s misrepresentations, they would not have purchased the products at a premium price. (Yarmark v. R.T.G. Custom Supply LLC, No. 22-cv-2398 (E.D.N.Y filed Apr. 27, 2022)).
Putative California class action filed in the U.S. District Court for the Central District of California against The Dress Barn, claiming that the company violated California’s False Advertising Law, Consumer Legal Remedies Act, and Unfair Competition Law. According to the complaint, the company uses false reference pricing and allegedly fabricates a false “original” price for a product, and advertises a substantially lower price under “the guise of a sale.” (Hernandez, et. al v. The Dress Barn. (C.D. Cal. filed Apr. 15, 2022)).
Putative California and nationwide class action filed in the U.S. District Court for the Central District of California against Pier 1 Imports U.S. Inc., claiming that the company violated California’s False Advertising Law, Consumers Legal Remedies Act, and Unfair Competition Law. According to the complaint, the company uses fictitious reference prices to deceive its consumers into believing they are receiving the benefit of a bargain. (Panaligan, et. al v. Pier 1 Imports U.S. Inc. (C.D. Cal. filed Apr. 15, 2022)).
