Proskauer on Advertising Law
Proskauer on Advertising Law

A Wrinkle in Time: Anti-Aging Advertising Claims Unsubstantiated by Testing Methods

The National Advertising Division (NAD)’s annual conference is taking place later this month, so we are taking the opportunity to highlight some recent NAD decisions of interest.  This post addresses Intraceuticals LLC (Atoxelene Skin Care Products), NAD Case No. 5953 (May 2016).

As part of its ongoing monitoring program, NAD reviewed Intraceuticals’ advertising claims that its Atoxelene Skin Care Products and Atoxelene Line Wand eliminate wrinkles. Among other express claims that NAD reviewed, were the following:

  • “Gets rid of wrinkles instantly – and they actually stay gone.”
  • “It’s not only effective, its 100% reliable.”
  • “Results are immediate.”

NAD determined that Intraceuticals failed to provide a reasonable basis for these claims. NAD disapproved of Intraceuticals’ small-scale trials of its products. Intraceuticals conducted three tests of the Atoxelene Line Wand. First, Intraceuticals tested the line wand on ten of its own staff members. Second, Intraceuticals tested its products on seven volunteers who were asked to report on their experience immediately after using the product. Third, Intraceuticals also conducted a randomized, double-blind study of ten subjects. While NAD found a number of issues with these tests, its chief criticism was that Intraceuticals’ test populations were too small at only seven or ten test subjects. Such a small sample size increases the possibility that the tested individuals are not representative of the targeted consumers. In addition, NAD was concerned that using employees as test subjects could bias the results. NAD therefore concluded that the results stemming from these tests of the Atoxelene Line Wand were insufficient to support Intraceuticals’ advertising claims.

In addition, NAD disapproved of Intraceuticals’ testing of isolated, individual ingredients within its Atoxelene Skin Care Products, rather than testing the product as a whole.  Intraceuticals tested specific ingredients both in vitro (in a controlled laboratory environment) and in vivo (on a whole, living organism).  NAD warned that in vitro testing of isolated ingredients had little or no validity in ascertaining the impact that a product will have when used by humans.  Also, NAD found that in vivo testing of isolated ingredients was inadequate in this instance because Intraceuticals’ marketing summaries failed to sufficiently describe the details of the test methodology or the results for each test subject.  More generally, NAD explained that testing particular ingredients in isolation cannot substitute for testing the product as a whole, particularly when a combination of ingredients affects the product‘s performance.  When testing is limited to the efficacy of an isolated ingredient, any claims based on the testing would have to be similarly limited to the ingredient itself.

Intraceuticals accepted NAD’s recommendation and agreed to modify or discontinue its advertising claims.  It looks like Intraceuticals may also have to fix a few wrinkles in its testing procedures before it makes further advertising claims.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240 or akaplan@proskauer.com /212-969-3671. We are editors of Proskauer on Advertising Law and partners in Proskauer’s False Advertising & Trademark practice.

Don’t Pick Me Off: Are Pre-Certification Claims Mooted By Deposited Full Settlement Offers?

On January 20, 2016, the Supreme Court held in Campbell-Ewald v. Gomez, 136 S. Ct. 663, 672, 193 L. Ed. 2d 571 (2016) that an unaccepted pre-certification settlement offer of complete relief in a putative class action, made to an individual plaintiff, does not moot that plaintiff’s claims.  As discussed in our previous coverage of Campbell-Ewald, the Supreme Court’s decision resolved a circuit split on that issue.

Campbell-Ewald stopped short of deciding the issue of whether a defendant actually tendering settlement funds (by sending a check or depositing the full offer of complete relief into an account payable to the individual plaintiff) would moot the plaintiff’s claims. So far, although lower courts are not all in agreement, they have tended to hold that such a deposit or tender, if unaccepted, does not moot a plaintiff’s claims. The issue has not made its way back to the Supreme Court, and given vigorous dissenting opinions from Chief Justice Roberts and Justice Alito, the Supreme Court may yet stop this trend.

The day after Campbell-Ewald was decided, the Eastern District of New York in Brady v. Basic Research, LLC became the first court to address this issue in the post-Campbell-Ewald landscape.  The Eastern District denied the defendants’ request for permission to deposit their settlement offer with the court under Rule 67(a) and thereby moot the plaintiffs’ claims.  Quoting Justice Ginsberg’s opinion of the court in Campbell-Ewald, the Brady court opined that a “would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted” and that it would be inappropriate to enter a judgment against the defendants over plaintiffs’ objection before plaintiffs had the opportunity to file a class certification motion.

More recently, two circuit courts of appeal have also turned to this question.  Last month, in Diana Mey v. North American Bancard, LLC, 2016 WL 3613395 (6th Cir. July 6, 2016), the Sixth Circuit held that a defendant could not moot pre-certification class claims by mailing a cashier’s check for the monetary amount of its full settlement offer to the plaintiff, where the check was promptly returned uncashed.

Similarly, in Chen v. Allstate Ins. Co., 819 F.3d 1136 (9th Cir. 2016), the Ninth Circuit held that a pre-certification full settlement offer, where the monetary amount is deposited in escrow, does not moot individual claims.  Like the Brady court, the Ninth Circuit emphasized Campbell-Ewald’s statement that a “would-be class representative with a live claim of her own must be accorded a fair opportunity to show that certification is warranted.”  The Ninth Circuit clarified that, in its view, an individual claim becomes moot when a plaintiff actually receives all of the relief claimed, and that, under Campbell-Ewald, an “unaccepted settlement offer has no force.”

District courts in other circuits have reached similar conclusions. See Kilpatrick v. Caribbean Cruise Line, Inc. et al., No. 14-cv-61572 (S.D. Fla. Aug. 1, 2016); Bais Yaakov of Spring Valley v. Varitronics, LLC, No. 14-5008 (D. Minn. July 28, 2016); Family Med. Pharmacy, LLC v. Perfumania Holdings, Inc., No. 15-0563 (S.D. Ala. July 5, 2016); Ung v. Universal Acceptance Corp., No. 15-127 (D. Minn. June 3, 2016); O’Neal v. Am.’s Best Tire LLC, No. 16-00056 (D. Ariz. June 2, 2016); Tegtmeier v. PJ Iowa, L.C., No. 15-00110 (S.D. Iowa May 18, 2016); Fauley v. Royal Canin U.S.A., Inc., 143 F. Supp. 3d 763 (N.D. Ill. 2016); S. Orange Chiropractic Ctr., LLC v. Cayan LLC, No. 15-13069 (D. Mass. Apr. 12, 2016).  And on remand in the Campbell-Ewald case itself, the Central District of California likewise found that plaintiff Gomez’s claims remained “live,” even after defendants attempted to tender the full settlement amount.

However, some district court decisions have come out the other way. The District of Maryland, in Gray v. Kern, 143 F. Supp. 3d 363 (D. Md. 2016) and in Price v. Berman’s Auto., Inc., No. 14-763 (D. Md. Mar. 18, 2016), has held that depositing a full settlement offer would moot an individual plaintiff’s claims against individual defendants. Gray v. Kern cited the Alito dissent for support, and Price v. Berman’s Auto. read Justice Ginsberg’s opinion as conceding that cases involving offers of settlement are critically distinguishable from those involving actual payment. The Southern District of New York in Leyse v. Lifetime Entm’t Servs., LLC, No. 13-5794 (S.D.N.Y. Mar. 17, 2016) reached the same result, holding that once defendant has “furnished full relief,” plaintiff cannot object to the entry of judgment in its favor.  In support, Leyse v. Lifetime Entm’t Servs., LLC observed that “a party can always incur a default judgment and liability without any factual findings,” and reasoned that a plaintiff is not entitled to an admission of liability.

In sum, a growing number of federal courts have found that unaccepted pre-certification settlement offers do not moot plaintiffs’ claims, even where the full amount claimed is deposited or tendered to would-be class plaintiffs, so long as the plaintiffs do not accept the offer.  But not all lower courts are in agreement, and the Supreme Court may ultimately rule that an actually tendered settlement offer would moot plaintiffs’ claims. All eyes, and accounts payable to putative class plaintiffs, now turn to the remaining circuit courts that have not yet addressed this issue.  Watch this space for further developments.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240 or akaplan@proskauer.com /212-969-3671. We are editors of Proskauer on Advertising Law and partners in Proskauer’s False Advertising & Trademark practice.

False Ad Claims Fail to Crystalize as Court Dismisses Amended Complaint against Sharp Electronics with Prejudice

Dismissals of class action complaints with prejudice are not as common as dismissals with leave to replead, but a recent decision in the District of New Jersey illustrates the circumstances under which a dismissal with prejudice is appropriate.

Plaintiffs filed a putative class action against Sharp Electronics alleging that Sharp falsely and misleadingly marketed its line of flat screen televisions as light emitting diode (“LED”) TVs without disclosing that its references to LED referred to the television’s LED light source technology for liquid crystal displays (“LCD”) rather than to a more advanced LED display technology. The plaintiffs claimed they relied on misleading statements to this effect on Sharp’s television cartons. Dismissing the plaintiffs’ original complaint, Judge William Martini observed that Sharp had stated on the television cartons that the product inside the carton was both an “LED TV” and a “Liquid Crystal Television.” The court found that the plaintiffs therefore did not adequately allege that a reasonable consumer could be deceived by Sharp’s marketing statements, and dismissed their original complaint without prejudice.

In their amended complaint, plaintiffs channeled new allegations that they purchased Sharp televisions because Sharp made marketing assertions on the Internet and at point-of-sale that the television was an LED TV. The court dismissed the amended complaint as well, this time with prejudice. First, the court held that the plaintiffs failed to meet the heightened pleading standard of Rule 9(b) because they failed to provide the court with the “who, what, when, where and how” of the alleged consumer fraud. Second, the court held that the plaintiffs again failed to adequately allege that a reasonable consumer could be deceived by Sharp’s marketing because the plaintiffs merely alleged misrepresentations “on the internet,” and the court determined that Sharp’s website contained a crystal clear disclosure in the “tech specs” section of its webpage that Sharp’s LED TVs were, in fact, displayed on LCD panels. These disclosures, like the disclosures on the TV cartons raised in the original complaint, again defeated plaintiffs’ claims that a reasonable consumer would be deceived.

The court assumed that plaintiffs’ counsel was well aware of the requirements of Rule 9(b), and given that plaintiffs failed to supplement the pleadings when given the chance to do so, the court surmised that plaintiffs would have no additional particulars to plead if given another opportunity to amend. Accordingly, the court dismissed the amended complaint with prejudice.

Dismissal with leave to file a third complaint (and on occasion even more) are not unheard of, and it will be interesting to see whether more courts follow Judge Martini’s lead and hold that, where a plaintiff twice fails to state a claim under the pleading standard of 9(b), the claim should be dismissed with prejudice on the ground that plaintiff would have nothing more to add in yet another amended complaint. Watch this space for further developments.

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Lyuba Shamailova, a summer associate, assisted in preparing this post.

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Want to talk advertising? We welcome your questions, ideas, and thoughts on our posts. Email or call us at lweinstein@proskauer.com /212-969-3240 or akaplan@proskauer.com /212-969-3671. We are editors of Proskauer on Advertising Law and partners in Proskauer’s False Advertising & Trademark practice.

Sugar Rush: FDA Rejects Use of “Evaporated Cane Juice” to Describe Sweeteners

For years, food companies have been using the term “evaporated cane juice” in the ingredients list on food products. This has resulted in a number of lawsuits by consumers claiming that the term misled them into thinking those products did not contain sugar, including this failed putative class action against KIND.  In May 2016, the Food and Drug Administration (“FDA”) chimed in with guidance advising the food industry that the agency is not so sweet on the term “evaporated cane juice,” and that this term should not be used on food labels to describe sweeteners derived from the fluid extract of sugar cane (i.e. cane sugars or syrups).  According to the FDA, use of this term to describe sweeteners made from sugar cane is false and misleading, since it suggests that the sweetener is “juice” from fruits or vegetables, and does not reveal that the ingredient’s “basic nature and characterizing properties are those of a sugar.”  Instead, the FDA says, this ingredient should be “declared on food labels as ‘sugar,’ preceded by one or more truthful, non-misleading descriptors if the manufacturer so chooses (e.g., ‘cane sugar’).” Continue Reading

FDA New-trition Rules

Last month, the FDA finalized amendments to the Nutrition Facts labeling rules for packaged foods and dietary supplements to reflect developments in nutrition science, including new scientific information regarding the link between diet and chronic diseases such as obesity and heart disease. Here are the highlights: Continue Reading

“KIND” of Nutritious—FDA Permits “Healthy” Label and Agrees to Rethink Its Definition of “Healthy” Foods

The Food and Drug Administration has kindly permitted Kind LLC to use the term “healthy” on its snack bars again, but with the caveat that the term must only be used in text clearly presented as part of Kind’s corporate philosophy, and not as a claim about the products’ nutrient content. Continue Reading

Parks’ Allegations Against “Finest” Franks Not In the “Ball Park” of False Advertising Claims

On May 10, 2016, Judge Joseph F. Leeson, Jr. of the Eastern District of Pennsylvania granted summary judgment on false advertising and trademark claims in favor of defendant Tyson Foods, Inc. and a subsidiary, the makers of “Park’s Finest” frankfurters. The decision illustrates important distinctions between two causes of action—trademark infringement and false advertising—both covered by the same section of the same statute, the Lanham Act. Continue Reading

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