Proskauer on Advertising Law
Proskauer on Advertising Law

Truffle Kerfuffle: Truffle Lawsuit Not on the Menu for Plaintiffs

Truffles are renowned as one of the rarest delicacies in the world.  Perhaps not quite as rare, but still fairly uncommon, is the dismissal with prejudice of a false advertising class action without the plaintiffs being afforded even a single opportunity to amend their complaint.

We are pleased to report today on a victory that a Proskauer team, led by Larry Weinstein and Jeff Warshafsky, obtained on behalf of Monini North America, Inc., in the defense of a class action false advertising lawsuit in the Southern District of New York, before Senior District Judge Louis Stanton.  As discussed below, Judge Stanton’s decision confirms that under both New York and California law, food and beverage makers may describe their products as being “substance flavored,” even if the product does not contain the substance, so long as the product label clearly discloses the product’s ingredients.

In May 2017, plaintiffs Vinay Jessani and Wendy Burnett sued Monini alleging violations of New York and California consumer protection law, as well as claims for breach of warranty, fraud and negligent misrepresentation.  Their class action complaint alleged that Monini, the U.S. subsidiary of one of the largest Italian olive oil manufacturers, falsely advertised that its “White Truffle Flavored Extra Virgin Olive Oil” was flavored by actual white truffle when, in fact, it is flavored by a synthetic aroma and contains no actual white truffle.

Monini moved to dismiss, and briefing was completed three weeks ago.  Last week, Judge Stanton dismissed the complaint in its entirety with prejudice, holding that no reasonable consumer would understand the product’s label as meaning that it contains white truffle.

“Courts routinely conclude that where a product describes itself as substance-flavored despite not containing the actual substance, and the ingredient list truthfully reflects that fact, as a matter of law the product would not confuse a reasonable consumer acting reasonably under the circumstances, and thus does not sustain a consumer fraud claim,” Judge Stanton wrote.  Monini’s label claimed that the product tasted like white truffle, but nowhere did it state that it contained white truffle.  Further, the label’s ingredient list disclosed that the ingredients were “extra virgin olive oil 98%” and “aroma 2%”; white truffle was not listed as an ingredient.  Under these circumstances, Judge Stanton held, no reasonable consumer would be misled.

Plaintiffs’ warranty- and fraud-based claims fared no better because the label’s representation that the product is “white truffle flavored” was indisputably true; the complaint conceded that the product’s synthetic aroma gave it the taste and smell of white truffle.

As noted, Judge Stanton dismissed the complaint with prejudice.  Although this is an unusual step in a false advertising class action, this case turned on the plain meaning of the product label.  No amendment to the pleadings could change the fact that Monini’s product label accurately disclosed its contents.

While this lawsuit met a quick end, several other similar lawsuits filed by Plaintiffs’ counsel remain pending against other sellers of truffle-flavored olive oils.  One case, making nearly identical allegations against Trader Joe’s, was filed in the Southern District of New York the same day as the case against Monini.  Trader Joe’s was recently ordered to answer the complaint and to engage in discovery.  Two other similar cases, filed against Sabatino and Urbani, are under way in California.  Proskauer is not representing any of these other ‘truffle oil’ sellers, but we will keep an eye on these cases as they move forward.  Watch this space for 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.

Can Inflating Jury Verdicts and Settlements Injure More than Just Your Reputation? Kansas Law Firm Sues Competitor For False Advertising

It’s not every day that a law firm sues a competing firm for false advertising. Earlier this month, however, a Wichita, Kansas personal injury law firm did just that. Brave Law Firm sued rival firm Truck Accident Lawyer’s Group and allegedly related entities in the U.S. District Court for the District of Kansas, alleging violations of the Lanham Act and other causes of action.

Brave Law Firm alleges that since 2007 the defendants have falsely advertised high-dollar verdicts and settlements they claim to have obtained for clients in various personal injury law suits. The advertisements at issue include television, print and phone book ads, as well as website content, “pay-per-click” advertising and direct mail brochures.

For example, Brave Law Firm’s complaint alleges that in one advertisement, defendants claimed to have recovered $2,400,000 for a client in a “[t]ractor-trailer accident involving extreme injuries and/or resulting in death or disfigurement,” but claims that the actual recovery was just $387,018.  In another advertisement, defendants allegedly stated that they obtained a jury verdict of $4,100,000 and a punitive damages award of $2,500,000 for a client in a personal injury case but according to the complaint, the recovery was just $850,000 and the jury did not award any punitive damages.

The complaint also alleges that defendants “advertised purported settlements that never happened.”  In one such instance, defendants allegedly advertised that they settled a case for $9,000,000, but according to the complaint, the client fired defendants prior to the settlement and the settlement actually was obtained by another lawyer.

Defendants have not yet answered the complaint or moved to dismiss, so it remains to be seen how they will respond to the accusations.  Watch this space for developments as this unique false advertising case moves forward.

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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.

Athletic Tape Maker Feels the Pain, Settles Misleading Advertising Suit

Proskauer’s sports law newsletter, Three Point Shot, recently covered a proposed $1.75 million settlement in a false advertising case involving athletic tape.  The case is Vuckovic v. KT Health Holdings, LLC, No. 15-cv-13696 in the U.S. District Court for the District of Massachusetts, and Proskauer’s coverage may be found here.

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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.

Game Over: Supreme Court Denies Plaintiff’s Class Certification Appeal after Voluntary Dismissal in Xbox 360 Lawsuit

Recently, the Supreme Court in Microsoft Corp. v. Baker, 137 S. Ct. 1702 (2017), held that the plaintiff in a putative class action involving Xbox 360 game consoles could not appeal from the District Court’s denial of class certification after plaintiff voluntarily dismissed his claims with prejudice.  While 28 U.S.C. § 1291 allows appeals from final decisions as a matter of right, the Supreme Court held that plaintiff’s voluntary dismissal did not qualify as an appealable final decision.  The Court determined that allowing such an appeal would undermine § 1291’s finality principle and subvert the discretionary nature of interlocutory class certification appeals under Rule 23(f).  Gamers, in other words, could not be allowed to hack § 1291 in this way.

The underlying lawsuit began in 2011 when plaintiff Seth Baker filed a putative class action lawsuit in the Western District of Washington, alleging that Microsoft’s Xbox 360 gaming console scratched and destroyed his game discs during game play.  The District Court denied the class certification and struck plaintiff’s class allegations.  Generally, the denial of class certification is not a final decision that triggers the right to appeal under § 1291.  Plaintiff therefore filed an interlocutory appeal from the denial of class certification under Fed. R. Civ. P. 23(f), which allows for discretionary interlocutory appeals.  The Ninth Circuit, however, denied plaintiff’s petition.  At this point, instead of proceeding with the litigation or settling his individual claims, the plaintiff chose to voluntarily dismiss his case with prejudice in an attempt to finagle a “final decision” and the right to immediately appeal to the Ninth Circuit under § 1291.  On appeal, the Ninth Circuit determined that the voluntary dismissal constituted a final decision under § 1291, and held that the district court abused its discretion in striking the plaintiff’s class allegations.

The Supreme Court granted certiorari and addressed the following question: Do federal courts of appeals have jurisdiction under § 1291 to review a district court order striking or denying class certification after the named plaintiffs voluntarily dismissed their claims with prejudice?  The Court, in an 8-0 opinion authored by Justice Ginsburg, answered in the negative: the plaintiff’s voluntary dismissal did not constitute a final decision that gave him the right to appeal under § 1291.

First, the Court noted that the plaintiff’s voluntary dismissal tactic would invite protracted litigation and piecemeal appeals.  The Court envisioned a scenario in which the District Court denies class certification on certain grounds, the plaintiff appeals this issue and the Court of Appeals reverses and remands to the District Court.  On remand, if the District Court denies class certification on different grounds, the plaintiff could again seek to voluntarily dismiss the case and receive another appeal as of right.  Because the plaintiff could exercise this voluntary dismissal tactic for each class certification denial, the tactic would lend itself to multiple interlocutory appeals, in contravention of § 1291’s attempt to minimize such appeals by permitting them as of right only for final judgments.

Second, the Court explained that the plaintiff’s tactic would allow for indiscriminate appellate review of interlocutory orders, thereby undercutting the discretionary scheme of Rule 23(f).  Rule 23(f) authorizes permissive interlocutory appeals from adverse class certification orders at the discretion of the Court of Appeals.  By allowing plaintiff an appeal as of right under § 1291 through his voluntary dismissal, the Ninth Circuit would have no discretion to deny the appeal once jurisdiction was established.  This would undercut the circuit court’s discretion over class certification appeals under Rule 23(f), the Supreme Court noted.

Third, the Court took issue with the one-sided nature of the plaintiff’s right to appeal if a voluntary dismissal were considered a final decision under § 1291.  Because only a plaintiff can initiate a voluntary dismissal, it follows that only a plaintiff could force an immediate appeal.  The inability of defendants to initiate a voluntary dismissal and force a right to appeal in this way provided further justification for denying appellate jurisdiction after the plaintiff’s voluntary dismissal.

In short, the Court found that the plaintiff’s voluntary dismissal maneuver contravened the “final decision” requirement of § 1291.  If the Court allowed plaintiff to game the system by appealing after voluntary dismissal, it would turn Congress’ final decision rule into a “pretty puny one.”  With this ruling, the Court shut down a potential plaintiff-only appellate ‘cheat code’ to ‘skip a level’ and get automatic appellate review of adverse class certification rulings.

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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.

Eleventh Circuit Does Not Skim Over First Amendment Concerns in Labeling Milk

Be careful not to skim over potential First Amendment challenges to commercial speech regulations in labeling cases. By ‘whey’ of example, the Eleventh Circuit recently found that the actions of the Florida Commissioner of Agriculture and the Chief of the Florida Bureau of Dairy Industry violated Ocheesee Creamery LLC’s First Amendment rights related to the labeling of its products. Ocheesee Creamery LLC v. Putnam, 851 F.3d 1228 (11th Cir. 2017).

Ocheesee Creamery is a dairy company that produces milk and other dairy products. One such product is an all-natural, additive-free 100% skim milk, which Ocheesee Creamery labels as “skim milk” on the product packaging.

Florida law restricts the sale of milk and other milk products not classified as “Grade A” products. A “Grade A” designation requires that any vitamin A that is lost or removed from a product during the skimming process be replaced. Because Ocheesee’s product did not qualify for this Grade A designation, the state of Florida notified Ocheesee that its all-natural skim milk did not meet the definition of milk and, thus, Ocheesee could only sell this product if it was labeled as “imitation skim milk.” Ocheesee refused since the only ingredient in its product was, in fact, skim milk. Ocheesee also refused to add vitamin A back into its all-natural product.  Ocheesee Creamery filed a lawsuit challenging this restriction in the Northern District of Florida, which found in favor of the State.

On appeal, the Eleventh Circuit applied the Supreme Court’s test for evaluating restrictions on commercial speech, which was set forth in Central Hudson Gas & Electric Corp. v. Public Service Commission, 447 U.S. 557 (1980). Under Central Hudson, a court considering a restriction on commercial speech must first determine whether the speech is protected under the First Amendment. The First Amendment protects commercial speech unless it 1) concerns unlawful activity or 2) is false or inherently misleading. The Eleventh Circuit found that neither of these exceptions applied to Ocheesee in this case.

First, the Eleventh Circuit held that Ocheesee’s use of the term “skim milk” on its product label was not unlawful because the state’s position was that under Florida law Ocheesee could call its product “skim milk” as long as the label also indicated that the product was “imitation” milk.  Second, the Eleventh Circuit held that Ocheesee’s use of the term “skim milk” was not inherently misleading—or even, according to the Court, potentially misleading—because it was a statement of objective fact. As a result, the Court concluded, Ocheesee’s commercial speech on its all-natural skim milk label was constitutionally protected.

The Court then proceeded to apply Central Hudson’s three-pronged intermediate scrutiny test. Under this test, the Court must determine: 1) “whether the asserted governmental interest is substantial”; 2) “whether the regulation directly advances the governmental interest asserted”; and 3) “whether it is not more extensive than is necessary to serve that interest.”

The Eleventh Circuit focused its analysis on the third prong of the test, finding that Florida’s restriction “is clearly more extensive than necessary to achieve its goals.” The Eleventh Circuit noted that there had been extensive negotiations between Ocheesee and the State concerning the language used on Ocheesee’s all-natural skim milk label, and pointed out that “numerous less burdensome alternatives existed and were discussed by the State and the Creamery during negotiations that would have involved additional disclosure without banning the term ‘skim milk.’” Consequently, the Court concluded that the restriction was more extensive than necessary to achieve the goals of preventing deception and ensuring adequate nutritional standards. The Court thus concluded that Florida’s restriction of Ocheesee’s commercial speech violated the First Amendment and vacated the district court’s grant of summary judgment in favor of the State.

The Eleventh Circuit’s decision offers some reassurance to companies that the First Amendment provides some protection for objectively truthful descriptions of their products, even in the face of restrictions imposed by various state labeling laws, although this protection continues to be balanced against the state interests served by these laws.

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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.

Court Dismisses “Phantom Markdown” Suit against Saks

Our colleagues at Proskauer’s commercial litigation blog, Minding Your Business, recently covered a dismissal of a discount advertising suit asserted against Saks. The case is Nunez v. Saks Inc., 2017 WL 1184058 (S.D. Cal. Mar. 22, 2017), and Proskauer’s coverage may be found here.

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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.

#SocialMedia #Endorsement #Disclosures #Sponsored (notthispost): FTC Warns Social Media Influencers and Advertisers about Failure to Disclose Relationships

Recognizing the growing role of social media and influencers in marketing today, the Federal Trade Commission announced on April 19 that it sent more than 90 letters to social media influencers and marketing executives reminding them to disclose relationships between brands and endorsers when promoting products on social media.  Although the FTC has taken action against brands and marketers for endorsement-related violations before, the letters mark the first time the FTC has directly contacted influencers.

The letters follow on the FTC’s  Final Guides on Endorsement and an updated FAQ document titled “The FTC Endorsement Guides: What People are Asking.” Under the Guides, an endorsement is defined as “any advertising message . . .  that consumers are likely to believe reflects the opinions, beliefs, findings, or experiences of a party other than the sponsoring advertiser, even if the views expressed by that party are identical to those of the sponsoring advertiser.” Simply posting a picture of a product on social media without any text can constitute an endorsement if it conveys that the poster likes and approves of the product.

The Guides make clear that an endorsement “must reflect the honest opinions, findings, beliefs, or experience of the endorser,” and if the advertisement represents that the endorser uses the endorsed product, the endorser must have actually used the product. Additionally, if there is a “material connection” between an endorser and an advertiser (a connection that might affect the weight or credibility that consumers give the endorsement), the connection must be “clearly and conspicuously” disclosed. Examples of a material connection can include a business or family relationship, monetary payment or providing the endorser with free products.  If such a connection is not disclosed, or if false or unsubstantiated claims are made in an endorsement, liability may attach to both the advertiser and the endorser.

The FTC’s recent wave of letters reminds both influencers and marketers of the need to “clearly and conspicuously” disclose any material connection between the endorser and advertiser, unless it is already clear from the context of the communication.  The letters explain how Instagram posts can meet the “clear and conspicuous” standard for disclosures, instructing influencers to make this disclosure above the “more” button on Instagram. The FTC demonstrated its familiarity with Instagram, explaining that many consumers “viewing posts in their Instagram streams on mobile devices typically see only the first three lines of a longer post unless they click ‘more.’” The FTC recognized that consumers on Instagram sometimes may not click “more” or may skip over multiple tags, hashtags or links at the end of a long post.  Also, simply saying “#sp,” “Thanks [Brand],” or “#partner” does not constitute a sufficiently clear disclosure, according to the FTC.

The letters emphasize the FTC’s position that brands and influencers are responsible for ensuring that adequate disclosures regarding endorsements are made. In the letters to marketers, the FTC advised that they inform endorsers of their disclosure responsibilities and monitor endorsements to ensure that appropriate disclosures are made. The FTC also encouraged marketers to implement a social media policy to address disclosure of material connections by endorsers, or if marketers have an existing social media policy, to evaluate how this policy applies to posts by endorsers.

The FTC did not publicly identify the influencers and marketers to whom it sent the letters, but did say that the list of recipients was developed from petitions filed by Public Citizen and affiliated organizations, as well as the FTC’s own browsing of Instagram.

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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.

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