false advertising consumer class actions: best practices

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Presenting a live 90-minute webinar with interactive Q&A

False Advertising Consumer Class Actions:

Best Practices and Latest Developments Bringing or Defending Misleading Advertisement Litigation

Today’s faculty features:

1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific

THURSDAY, NOVEMBER 19, 2015

Joshua A. Reiten, Partner, Perkins Coie, San Francisco

Ali R. Rabbani, Winston & Strawn, Los Angeles

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Perkins Coie LLP

Recent Trends and Developments in False Advertising

Consumer Class Actions

Joshua Reiten

(415) 344-7118

[email protected]

Perkins Coie LLP | PerkinsCoie.com

Overview

1. “Handmade”/“Artfully Crafted” Cases

2. Ascertainability & Class Certification

3. Preemption/Primary Jurisdiction

4. “Corporate Responsibility” Cases

5. “Compare At” Pricing Suits

6


“Handmade” / “Artfully Crafted” Cases

New breed of class actions challenge claims

about HOW the products are made

• Alcohol cases

• Bread cases

7

Perkins Coie LLP | PerkinsCoie.com 8

“Handmade” / “Artfully Crafted” Alcohol Cases

Recent labeling cases and challenged terms

• “Craft”; “Artfully Crafted”; trade name Parent v. MillerCoors (N.D. Cal.)

• “Handmade”; “Handcrafted” Salters v. Beam Suntory (S.D. Fla.) Welk v. Beam Suntory (S.D. Cal.) Nowrouzi v. Maker’s Mark (S.D. Cal.)

• “Handmade”; “made in an old fashioned still” Pye v. Fifth Generation, Inc. (N.D. Fla.) Hofman v. Fifth Generation, Inc. (S.D. Cal.)

• “Light” Cruz v. Anheuser-Busch, LLC (C.D. Cal.)

8


“Handmade” / “Artfully Crafted” Bread Cases

• “Store baked”; “Made in house”

• Mladenov v. Wegman’s (D.N.J.)

• Mladenov v. Whole Foods (D.N.J.)

• Mao v. Acme Markets (D.N.J.)

• District Court struck the class allegations and

dismissed the claims under Rule 12(b)6)

• Mladenov v. Wegmans Food Markets, Inc., 2015 WL

5023484, at *16, -- F. Supp. 3d -- (D.N.J. Aug. 26, 2015)

9


Ascertainability & Class Certification

Heightened ascertainability standard post-Carrera?

• Solid in the Third Circuit (Carrera, Byrd)

• Eleventh Circuit has adopted (Karhu)

• Fourth Circuit appears to follow (EQT)

• Rejected by Sixth & Seventh Circuits

• Rikos (6th Cir.)

• Mullins (7th Cir.)

• Ninth Circuit currently split

• Some N.D. cases approve (Perrine, Clorox)

• Others reject (McCrary, Morales, Rahman)

• Ninth Circuit poised to resolve in Jones v. ConAgra

10


Ascertainability & Class Certification

Ascertainability strategies

• Retailer subpoenas

• Loyalty card data

• Discoverability / Privacy

issues

• Sufficient to certify?

• Under-inclusiveness?

• Narrowed classes

11


Preemption & Primary Jurisdiction

Federal Preemption

• Limited application post-Pom Wonderful

• Ninth Circuit rejections

• Reid (9th Cir. 2015) - “No Trans Fat” claim subject

to state law claims

• Astiana (9th Cir. 2015) - “all natural” not a

protected phrase under FDCA

• Recent lower court decisions follow

• Saeidain (C.D. Cal. 2015) – fruit juice content

12



Federal Preemption

• Some successes for defendants

• Gisvold v. Merck (S.D. Cal. 2014) – dismissing

sunscreen labeling claims on preemption and

primary jurisdiction grounds

• Bimont v. Unilever (S.D.N.Y. 2014) – “slack fill”

claims preempted as to cosmetics/OTC drugs

• Gallagher v. Bayer (N.D. Cal. 2015) – vitamin label

claims preempted by FDCA and DSHEA

13



Primary Jurisdiction

• Recent Ninth Circuit cases

• Astiana – PJ appropriate on “all natural” claims (but district

court erred by dismissing rather than staying)

• Reid – PJ inappropriate where FDA issued guidance in 2003

and did not indicate it would revisit

• Stays in “ECJ” cases

• Other recent decisions

• Backus (N.D. Cal. 2015) – PJ appropriate where FDA action

on trans fats anticipated

• Zakaria (C.D. Cal. 2015) – PJ inappropriate, no complex issue

or issue of first impression

14


“Corporate Responsibility” Class Actions

• Allege defendants failed to disclose use

of forced labor in supply chain

• Theory: consumers “injured” by alleged

coercive labor practices

• Tied to Cal. Supply Chain Transparency

Act

15


“Corporate Responsibility” Class Actions

Cat food

• Challenge labor conditions of Thai fishermen

• Sud v. Costco Wholesale Corp. (N.D. Cal.)

• Barber v. Nestle USA Inc. (C.D. Cal.)

• MTD pending: multiple sources of fish; impossible to trace back to

alleged ‘forced labor’ sources

• Wagner v. Mars Inc. (C.D. Cal.)

Chocolate

• Complaints allege child labor practices in Africa

• Hodson v. Mars Inc., (N.D. Cal.)

• Dana v. Hershey Co. (N.D. Cal)

• McCoy v. Nestle USA Inc. (N. D. Cal.)

16


“Compare At” Pricing Suits

• Theory: “compare at” and “former”

prices are misleading, overstated,

sham prices.

• Outlet and discount stores are prime

targets.

• California law prohibits advertising a

former price “unless the alleged

former price was the prevailing market

price” within preceding three months.

Cal. Bus. & Prof. Code § 17501

17


“Compare At” Pricing Suits

Dozens of retailers targeted:

• Gattinella v. Michael Kors (S.D.N.Y. 2014)

(Settled for $4.9M)

• Branca v. Nordstrom (S.D. Cal. 2014)

(Motion to dismiss SAC denied)

• Cabrera v. Kenneth Cole (S.D.N.Y. 2015)

• Horosny v. Burlington Coat Factory (C.D. Cal. 2015)

• Jacobo v. Ross Stores (C.D. Cal. 2015)

• Chester v. TJ Maxx (C.D. Cal. 2015)

• Berkoff v. Marshalls (C.D. Cal. 2015)

• Metoyer v. HomeGoods (C.D. Cal. 2015)

• Sperling v. DSW (C.D. Cal. 2015)

18

©2015 Winston & Strawn LLP

Defending False Advertising Class Actions

Ali R. Rabbani Winston & Strawn

(213) 615-1700 [email protected]

© 2015 Winston & Strawn LLP 20

Agenda

• Substantive Motions and Defenses

• Failure to Plead False or Misleading Representations

• Materiality and Puffery

• Failure to Plead Reliance or Causation

• Preemption and Related Defenses

• Defeating Class Certification

• Removal


Failure to Plead False or Misleading Representations

• Fink v. Time Warner Cable, 837 F. Supp. 2d 279 (S.D.N.Y. 2011), aff’d, 714 F.3d 739 (2d Cir. 2013)

• The Southern District of New York dismissed false advertising claims under California and New York law.

• The court found that plaintiffs insufficiently alleged that Time Warner’s advertised internet speeds were misleading. In particular, Time Warner’s claims of speeds “up to” 3x faster than DSL and 100x faster than dial-up were not misleading because plaintiffs’ allegations only related to specific computer applications, not their internet connections as a whole.

• The court also found that a reasonable consumer would not be misled because the advertisements were qualified with the phrase “up to.”

• Manchouck v. Mondelez Int’l Inc., 2013 WL 5400285 (N.D. Cal. 2013)

• The Northern District of California dismissed false advertising class action based on assertion that the “made with real fruit” label on Nabisco’s strawberry and raspberry Newton cookies was misleading.

• The Court found that the complaint’s allegations were insufficient to meet the reasonable consumer standard.


Failure to Plead False or Misleading Representations

• Mason v. The Coca-Cola Co., 774 F. Supp. 2d 699 (D.N.J. 2011) • The District of New Jersey dismissed plaintiffs’ claim that "Diet Coke Plus" was

deceptively advertised as healthy and containing nutritional value.

• The court found that Coca-Cola’s claims were not false because Diet Coke Plus did, in fact, contain vitamins and minerals.

• Loreto v. Procter & Gamble Co., 2013 WL 645952 (6th Cir. 2013)

• The Sixth Circuit affirmed, in part, the Southern District Ohio’s dismissal of false advertising claims under Ohio and New Jersey law.

• The court found that all but one of defendant’s claims relating to the cold medicine with vitamin C were neither false nor plausibly misleading.

• Wright v. General Mills, Inc., 2009 WL 3247148 (S.D. Cal. 2009)

• The Southern District of California dismissed UCL, FAL, and CLRA claims, finding that plaintiff failed to allege that defendant’s use of “100% Natural” on granola bar labeling and advertising was misleading under Twombly/Iqbal.


Materiality and Puffery

• Elias v. Hewlett Packard Co., 950 F. Supp. 2d 1123 (N.D. Cal. 2013) • The Northern District of California dismissed false advertising claims under California

law.

• The Court found that the alleged misrepresentation of “compact but powerful” amounted to non-actionable puffery because it says “nothing about the specific characteristics or components of the computer.”

• Hughes v. Panasonic Consumer Electronics Co., 2011 WL 2976839 (D.N.J. July 21, 2011)

• Marketing televisions as having “industry leading black levels and contrast ratios.”

• The District of New Jersey found that “Panasonic’s alleged misrepresentations about the Televisions’ ‘industry leading’ technology and features, which create superior image and color quality, are not ‘statements of fact,’ but rather subjective expressions of opinion.”

• In re Ferrero Litig., 794 F. Supp. 2d 1107 (S.D. Cal. 2011) • Advertising Nutella as “healthy.”

• The Southern District of California noted that “[g]eneralized, vague, and unspecified assertions constitute ‘mere puffery’ upon which a reasonable consumer could not rely ….” However, the court denied the motion to dismiss because a reasonable consumer could be deceived.


Materiality and Puffery

• Baltazar v. Apple, Inc., 2011 WL 6747884 (N.D. Cal. Dec. 22, 2011)

• Apple’s statement that the iPad can be used “just like a book.”

• The Northern District of California found such claim was “mere puffery.”

• Vitt v. Apple Computer, Inc., 2012 WL 627702 (9th Cir. Feb. 28, 2012)

• Apple’s advertisement of iBook G4 as “mobile,” “durable,” “portable,” “rugged,” “built to withstand reasonable shock,” “reliable,” “high performance,” “high value,” an “affordable choice,” and an “ideal student laptop.”

• The Ninth Circuit affirmed that these statements are generalized, non-actionable puffery because they are “inherently vague and generalized terms” and “not factual representations that a given standard has been met.”


Failure to Plead Reliance or Causation

• In re Actimmune Mktg. Litig., 2010 WL 3463491 (N.D. Cal. Sept. 1, 2010), aff’d, 2011 WL 6887072 (9th Cir. Dec. 30, 2011)

• The Northern District of California dismissed UCL claims for failure to allege reliance on allegedly misleading representations.

• Consumers failed to allege that their prescribers believed that the drug was effective for the challenged indication as a result of allegedly fraudulent off-label promotion.

• Payers failed to allege that prescribers relied upon off-label promotion as opposed to “perfectly legitimate channels of communication” with defendant.

• Cleary v. Philip Morris Inc., 656 F.3d 511 (7th Cir. 2011)

• The Seventh Circuit affirmed dismissal of putative class action complaint, holding that plaintiffs failed to state a claim for unjust enrichment, even assuming that Illinois recognized an independent tort, where they alleged no deception, causation, or harm.


Preemption and Related Defenses

• Hairston v. South Beach Beverage Co., 2012 WL 1893818 (C.D. Cal. May 18, 2012)

• Plaintiff challenged the labeling of SoBe Lifewater, including:

• (1) the statement “all natural with vitamins” because some of the vitamin ingredients were synthetic;

• (2) fruit names used to describe Lifewater flavors even though Lifewater doesn’t contain any fruit;

• (3) using a vitamin’s common name (e.g., B12) when it is synthetic.

• Ruling on a motion to dismiss, the court held that plaintiff’s claims relying on the fruit and vitamin names were preempted.

• FDA allows the use of fruit names/images to describe the characterizing flavor of the product (even if product doesn’t contain fruit).

• FDA regulations treat “natural” and “synthetic” vitamins as equivalent.


Preemption and Related Defenses

• Astiana v. Dreyer’s Grand Ice Cream, Inc., 2012 WL 2990766 (N.D. Cal. July 20, 2012).

• The Northern District of California held that (1) plaintiff stated claims that “All Natural Flavors” and “All Natural Ice Cream” slogans were misleading, and (2) claims were not preempted by the Food, Drug & Cosmetic Act and FDA regulations (but dismissed claim under Magnuson-Moss Act).

• Taradejna v. General Mills, Inc., 12-cv-00993 (D. Minn.) (Dec. 10, 2012 Order)

• Plaintiffs challenged General Mills’ use of Milk Protein Concentrate in its Greek Yogurt products.

• Minnesota federal court dismissed claims because FDA had primary jurisdiction over the underlying question of whether yogurt could contain milk protein concentrate.


Class Definition

• Ascertainability. Are class members objectively identifiable?

• Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013)

• Denying certification where there was no “reliable, administratively feasible method to determine class membership.”

• Overbreadth. Does the class definition include persons without claims?

• Sanders v. Apple Inc., 672 F. Supp. 2d 978 (N.D. Cal. 2009)

• Striking class allegations where definition would include owners of computers who neither purchased them nor saw ads, individual reliance issues would predominate, and different state laws would apply.

• Failsafe. Does the definition incorporate merits inquiry?

• This is often done in order to avoid overbreadth, causing the class to be unascertainable without detailed inquiry.


Commonality

• Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct. 2541 (U.S. 2011)

• “Commonality requires the plaintiff to demonstrate that the class members ‘have suffered the same injury.’ This does not mean merely that they have all suffered a violation of the same provision of law.…Their claims must depend upon a common contention - for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of classwide resolution—which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke.”

• Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013) • Suggested that need to calculate invidualized damages may, on its own, defeat class

certification.

• Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979 (9th Cir. 2015).

• The Ninth Circuit “reaffirmed” that damages calculations alone cannot defeat class certification.


• Major v. Ocean Spray Cranberries, Inc., 2013 WL 2558125 (N.D. Cal. June 10, 2013)

• A plaintiff who seeks to bring claims for products she did not purchase is atypical.

• In re Aqua Dots Products Liability Litig., 654 F.3d 748 (7th Cir. 2011) • A plaintiff who seeks class-wide relief already available through defendant’s voluntary

refund program does not fairly and adequately represent class members.

• “Plaintiffs want relief that duplicates a remedy that most buyers already have received, and that remains available to all members of the putative class. A representative who proposes that high transaction costs (notice and attorneys' fees) be incurred at the class members' expense to obtain a refund that already is on offer is not adequately protecting the class members' interests.”

• Peviani v. Natural Balance Inc., 2011 WL 1648952 (S.D. Cal. May 2, 2011) • A plaintiff who does not share the same injuries is an inadequate representative, and

her claims are not typical.

• Holding that wife of user of performance enhancement product failed to satisfy adequacy and typicality requirements because she did not suffer injuries users may have suffered.

Adequacy and Typicality


• Pelman v. McDonald’s Corp., 272 F.R.D. 82 (S.D.N.Y. 2010)

• Individual questions:

• Whether class members purchased because they believed the products were healthful.

• Causal relationship between fatty, salty food and alleged health conditions.

• Sources of food consumed.

• The Southern District of New York denied class certification.

• Rule 23(c) issue certification also denied for lack of proof of numerous persons of age who relied upon advertising and suffered health effects as a result.

Predominance and Superiority


• Weiner v. Snapple Beverage Corp., 2010 WL 3119452 (S.D.N.Y. Aug. 5, 2010) (denying certification).

• The Southern District of New York denied class certification.

• Claim that consumers paid more for beverages because of “All Natural” labeling could not be proved on a class-wide basis (causation and actual injury).

• Economist’s contention that he could develop models showing injury to all consumers was speculative and insufficient.

• The potentially millions of class members were also unascertainable, since purchasers likely did not retain receipts.

Predominance and Superiority


• Mazza v. Am. Honda Motor Co., 666 F.3d 581, 596 (9th Cir. 2012)

• District Court certified a nationwide class.

• Ninth Circuit decertified the nationwide class:

• Common questions did not predominate: “[V]ariances in state law overwhelm common issues and preclude predominance for a single nationwide class.”

• No presumption of reliance: California-only class would fail because the class would “almost certainly include[] members who were not exposed to, and therefore could not have relied on, Honda's allegedly misleading advertising material.”

• Red v. Kraft Foods Inc., 2011 WL 4599833 (C.D. Cal.)

• Declining to certify a nationwide class based solely on the grounds that Kraft engaged in nationwide marketing. (Sept. 29, 2011)

• Renewed motion for class cert. denied because even under subclasses “individual class members, to recover, would need to show, at a minimum, proof of how many purchases they made of the offending products, where and when, in order to discern [damages].” (Oct. 26, 2012)

Nationwide Classes


• Ries v. Arizona Beverages USA LLC, 287 F.R.D. 523 (N.D. Cal. 2012)

• Plaintiffs challenged “all natural” labeling” on Arizona iced tea drinks that contain high-fructose corn syrup and citric acid. Plaintiffs sought certification under Rule 23(b)(2).

• Injunctive relief class certified

• Monetary relief rejected

• Plaintiffs sought monetary restitution that would require “individualized assessments of damages” based on the number of products bought.

• Even though the amount of damages could be calculated based on overall beverage sales, “it would be unmanageable under Rule 23(b)(2), which lacks Rules 23(b)(3)’s notice and opt-out requirements designed to facilitate the award of monetary damages to individual class members.”

Nationwide Classes


• Class Action Fairness Act

• Jurisdiction based on minimal diversity.

• Amount in controversy is $5 million or more.

• Class of 100 or more members.

• Common question of law or fact.

• Advantages of Federal Court

• Often more favorable procedure and procedural law.

• Coordination (especially after Smith v. Bayer, 131 S. Ct. 2368 (2011))

• Potentially more effective enforcement of judgments.

• Potential Disadvantage

• Shady Grove Orthopedic Assocs. v. Allstate Ins. Co., 130 S. Ct. 1431 (2010) (holding that state law class action prohibitions that are procedural rather than substantive do not supersede Rule 23 in federal court).

Removal

false advertising consumer class actions: best practices

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