Proskauer on Advertising Law
Proskauer on Advertising Law

District Court Filters Out Preempted “Spring Water” False Advertising Claim

Earlier this year, we covered a decision from the District of Connecticut finding state law false advertising claims against the bottled water company Poland Spring preempted by the FDCA. Flowing from that decision is the case we are covering today: Frompovicz v. Niagara Bottling, LLC, 2018 WL 4465879 (E.D. Pa. Sept. 18, 2018).

Plaintiff, a spring water extractor, on behalf of a putative class of spring water extractors and bottlers, sued the defendants under the Lanham Act and Pennsylvania state law for falsely advertising that its bottled water is “spring water” when it is allegedly “well water.” In short, the different terms refer to how the water is collected: spring water flows naturally to the surface, whereas well water is pumped to the surface.

In an earlier decision, Frompovicz v. Niagara Bottling, LLC, 313 F. Supp. 3d 603 (E.D. Pa 2018), the court held that plaintiff’s Lanham Act claims were not precluded by the FDCA, but dismissed the complaint on other grounds with leave to amend. The defendants—a water extractor and three water bottlers—then moved to dismiss the amended complaint on the grounds that (1) Plaintiff lacked a right to sue under the Lanham Act, and (2) Plaintiff’s state law claims were preempted by the FDCA.

On the first point, the court, applying the well-known Lexmark test enunciated by the Supreme Court in a case bearing that name, held that plaintiff fell within the “zone of interest” implicated by the Lanham Act because he alleged that he suffered lost sales as a result of the alleged false advertising. Lexmark’s proximate cause test was easily satisfied as to the defendant that was a water extractor because it directly competed with the plaintiff and allegedly caused the plaintiff to lose sales to bottlers. The proximate cause analysis was more complicated as to the bottler defendants because they were plaintiff’s consumers, not his competitors. The court ultimately found proximate cause as to two of the bottler defendants with whom plaintiff had pre-existing commercial relationships that purportedly suffered due to their decision to falsely label water purchased from the competing extractor. The Lanham Act claim against the third bottler defendant with whom plaintiff lacked a pre-existing commercial relationship was dismissed under the court’s application of Lexmark.

On the second point, the court held that the state law claims were preempted by the FDCA. The FDA has defined “spring water” in regulations found at 21 C.F.R. § 165.110, so to the extent plaintiff’s Pennsylvania law claim relied on a different definition of “spring water” than the FDA’s definition, the claim was expressly preempted by the FDCA. Any remaining state law claims predicated on a violation of the FDCA were impliedly preempted because there is no private right of action to enforce the FDCA.

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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.

EDNY Sticks a Fork in Angus Steak Sandwich Class Action Complaint

A federal court in the Eastern District of New York recently dismissed a putative class action filed against Dunkin’ Brands alleging deceptive advertising with respect to its Angus Steak & Egg Breakfast Sandwich and Angus Steak & Egg Wake-Up Wrap. Judge Carolyn Amon dismissed the claims by out-of-state plaintiffs on jurisdictional grounds, and found the challenged product names were not misleading as a matter of law. The case clarified the standard that class-action plaintiffs must meet for the court to find specific personal jurisdiction, and demonstrated yet another court’s willingness to rule as a matter of law on whether advertising is misleading to a reasonable consumer.

The four named plaintiffs in this case were residents of New York, California, Massachusetts, and Florida, and sued on behalf of a purported nationwide class. They claimed that they had each purchased the products after viewing advertisements that featured actors repeating the word “steak,” and on-screen text displaying the words “Angus” and “steak.” The complaint alleged: 1) that the product names and advertisements represented that the products contained an intact, single piece of meat, when in fact the meat was ground; and 2) that the term “Angus Steak” indicated a pure beef patty, when the products in question contained preservatives and other ingredients. The plaintiffs claimed that as a result of the allegedly deceptive product names and advertisements, they were induced to pay a “premium” for the Angus products over other comparable sandwiches or wraps.

Before reaching the merits, Judge Amon ruled that the court lacked jurisdiction over the non-New York plaintiffs’ claims. Refusing to find general personal jurisdiction over Dunkin’ Brands in a state in which it was neither incorporated nor had its principal place of business, the court analyzed whether the plaintiffs’ claims were sufficient to merit a finding of specific personal jurisdiction. The court held that, under the Supreme Court’s 2017 Bristol Myers Squibb decision, each named plaintiff in a class action must show in-state contacts specific to their claim that give rise to jurisdiction over an out-of-state defendant. The court found that the out-of-state plaintiffs had not done so, and that their claims should therefore be dismissed.

The court also dismissed the New York plaintiff’s claim on the grounds that the product names and advertising in question were not misleading as a matter of law. Judge Amon noted that the advertisements clearly showed the ground beef patties, and therefore fully disclosed to a reasonable consumer that the products did not contain intact, single pieces of meat. She also rejected plaintiffs’ argument that the use of the term “Angus Steak” indicated that the beef patty contained no additives, preservatives, or other ingredients; rather, a reasonable consumer would understand the term to mean only that the product contained some Angus beef.

Will plaintiffs appeal, and will there be beef in the Second Circuit?  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.

Supreme Court Briefing Begins Over Equitable Tolling of Rule 23(f) Deadline

Our readers may recall that last year, the Supreme Court ruled that a plaintiff in a putative class action cannot subvert the discretionary nature of Rule 23(f) interlocutory review by voluntarily dismissing his case after denial of class certification to obtain an appeal from the denial of class certification as a matter of right.  We blogged about that decision here. Earlier this summer, the Supreme Court granted certiorari in yet another Ninth Circuit case involving Rule 23(f) interlocutory review. On August 20th, petitioner Nutraceutical Corp. filed its opening brief urging the Court to rule that district courts cannot equitably toll Rule 23(f)’s fourteen-day time period in which a party must seek immediate interlocutory review of an order denying or granting class certification.

In 2013, Troy Lambert filed a putative class action against Nutraceutical Corp., alleging that advertising for the “Cobra Sexual Energy” dietary supplement was false and misleading. The District Court initially certified a class, but after further discovery granted Nutraceutical’s motion for decertification in February 2015. Under Rule 23(f), Lambert had fourteen days from the date that order was entered to file a petition for permission to appeal this decision in the Ninth Circuit. Instead, during this fourteen-day window, Lambert’s attorneys made a verbal request in court to file a motion for reconsideration. The Court granted this request and set a briefing schedule that allowed Lambert to file its motion for reconsideration within twenty days of the entry of the decertification order. Lambert filed its motion on the twentieth day. The Court denied that motion, and Lambert then filed a Rule 23(f) petition within fourteen days of that denial. As a result, Lambert did not file his petition for interlocutory review of the decertification decision until more than three months after that decision was entered.

The Ninth Circuit held that it could toll or stay Rule 23(f)’s fourteen-day deadline under its equitable powers because this was merely a procedural deadline, not one after which the court lost jurisdiction over the matter. The Ninth Circuit found that Lambert’s attorneys’ verbal statement of intention to file a motion for reconsideration, coupled with the court-ordered briefing schedule, was sufficient to warrant equitable tolling of Rule 23(f)’s fourteen-day window in this case.

The Ninth Circuit’s decision got a rise out of Nutraceutical, which then filed a petition for certiorari with the Supreme Court, noting that the Ninth Circuit’s opinion created a circuit split as to the standard for when Rule 23(f)’s deadline can be equitably tolled. The Supreme Court granted certiorari in June. On August 20th, Nutraceutical filed its opening brief in which it argued that Rule 23(f)’s fourteen-day window should serve as a “strict and unyielding deadline that precludes equitable exceptions.” This fourteen-day window is purposefully short, according to Nutraceutical, to reduce the “delay, disruption, and waste of judicial resources” caused by interlocutory appeals. Nutraceutical also argued that allowing the Court to exercise its equitable discretion to extend this deadline would create uncertainty.

In the coming months, additional briefs will be filed and the Supreme Court will hear oral argument. The case is Nutraceutical Corp. v. Lambert, Dkt. No. 17-1094. Watch this space for further updates.

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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 Puts “FDA-Cleared” Complaint on Ice

The Central District of California recently dismissed, for the second time, a putative class action filed by two plaintiffs who claimed to have purchased Zeltiq Aesthetics, Inc.’s “CoolSculpting” fat-reduction treatments under the allegedly mistaken belief that the treatments had been “approved,” not just “cleared,” by the U.S. Food and Drug Administration.

The CoolSculpting “fat-freezing” procedure is the only “FDA-cleared,” non-surgical fat-reduction treatment of its kind, according to CoolSculpting’s website.  It uses “controlled cooling to eliminate stubborn fat that resists all efforts through diet and exercise.”  Plaintiffs alleged that the “FDA-cleared” claim was important to their decisions to purchase CoolSculpting treatments.

Plaintiffs first argued that the “FDA-cleared” claim, and a related “FDA-cleared, safe and effective” claim, were misleading partial representations that violated California law because they implied to consumers unaware of the distinction between FDA “approved” and FDA “cleared” that the device had satisfied the more rigorous FDA premarket approval application process.  FDA “clearance” refers to a less rigorous Section 510(k) premarket notification clearance process, which CoolSculpting had successfully completed.

Because the plaintiffs could not explain how the factually true “FDA-cleared” claim on its own could cause reasonable consumers to believe that CoolSculpting had received FDA approval, the court found that plaintiffs had failed to carry their burden to plead facts that, if taken as true, would show a “probability that a significant portion of the general consuming public or of targeted consumers, acting reasonably in the circumstances, could be misled.”

In addition, the court noted that, according to FDA regulations, FDA clearance indicates that a device is at least as “safe and as effective as a legally marketed device,” and that “special controls” applicable to Class II medical devices such as CoolSculpting provide “reasonable assurance of the safety and effectiveness” of such devices for their intended use.  As a result, plaintiffs’ arguments that the words “safe and effective” could be used only in connection with FDA approval and not clearance were to no avail.

Plaintiffs also argued that even if the “FDA-cleared” claims were not misleading, Zeltiq had a duty to disclose the distinctions between FDA approval and FDA clearance.  The court disagreed, holding that a manufacturer’s duty of disclosure to customers is limited to warranty obligations absent either an affirmative misrepresentation or a safety issue, neither of which was present here.

The court dismissed plaintiffs’ “FDA-cleared” and “FDA-cleared, safe and effective” claims with prejudice.  The court dismissed without prejudice plaintiffs’ remaining allegations – including some about references on CoolSculpting’s website to magazines and other publications that allegedly described CoolSculpting as “FDA-approved” – because the complaint did not allege with particularity that the plaintiffs were personally exposed to those representations.

Plaintiffs filed a Third Amended Complaint on July 2, 2018, in which they no longer allege that Zeltiq concealed the distinctions between FDA approval and FDA clearance, though they still maintain that Zeltiq misrepresented the true nature of CoolSculpting’s FDA regulatory status.  Zeltiq renewed its motion to dismiss for the third time on July 23, 2018.  The case is Carmen Otero et al. v. Zeltiq Aesthetics, Inc., No. 2:17-cv-03994 in the Central District of California.  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.

Ninth Circuit Puts Restitution Claims to Rest in Discount Advertising Case

The Ninth Circuit recently addressed once again the common practice in outlet stores and other retail establishments of juxtaposing the price at which a fashion item is offered for sale with a higher price advertised as a former price, or as the supposed market value, of that item.  Chowning v. Kohl’s Dep’t Stores, 2018 WL 3016908, (9th Cir. 2018).  The most recent previous Ninth Circuit decisions addressing discount price advertising concerned the adequacy of pleadings at the motion to dismiss stage, and thus had limited relevance to the merits of those cases or their ultimate outcomes.

The Kohl’s decision is of potentially greater significance.  In Kohl’s, the panel affirmed the district court’s grant of partial summary judgment in favor of defendant, finding that plaintiff was not entitled to restitution under California law for allegedly being tricked into thinking she was purchasing items at a substantial discount.  In doing so, the court construed California consumer protection laws in a way that potentially significantly limits the ability of plaintiffs to recover any money in cases involving allegedly false or fraudulent discount price advertising.

Plaintiff, who asserted claims under the California Unfair Competition Law (UCL), False Advertising Law (FAL), and Consumer Legal Remedies Act (CLRA), alleged that Kohl’s displayed two prices on goods for sale in its store:  the “Actual Retail Price,” and a significantly lower price reflecting what Kohl’s charges consumers for the item.  According to the complaint, the Actual Retail Prices did not reflect prevailing market retail prices and were therefore fraudulent, deceiving the plaintiff into believing she was purchasing the products at a discounted price.

Judge Gary Klausner of the Central District of California had granted Kohl’s motion for summary judgment as to the plaintiff’s monetary claims for restitution.  In affirming, the Ninth Circuit held that under the UCL, FAL and CLRA, restitutionary damages are calculated by the difference between the price paid and the value received.  Although plaintiff alleged that the Actual Retail Prices were deceptive, she did not introduce competent evidence of how much value she received for the items she purchased.  Thus, the Ninth Circuit agreed with the district court that because there was no evidence of the value of the goods purchased, the restitution calculation was “impossible,” which entitled Kohl’s to summary judgment.

The Ninth Circuit’s decision was designated Not for Publication, and thus it does not have precedential value.  However, it likely will put a damper on damages claims under California law based on allegations of deceptive discount price advertising, as it signals that the Ninth Circuit is receptive to the holdings of other courts that previously reached the same result in precedential opinions.  We recently covered some of those decisions here.  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.

Update: Second Circuit Affirms Dismissal of Lanham Act Claims Based on Allegedly False UL Certification

Last fall, we covered the Southern District of New York’s dismissal of Board-Tech Electronic Company’s Lanham Act false advertising claim.  Based on its own internal testing, Board-Tech alleged that light switches sold by its competitor, Eaton Corporation, were falsely labeled as complying with an Underwriters Laboratories (“UL”) certification standard.  However, the district court found that Board-Tech had not plausibly alleged that Eaton’s labelling was false because the product was in fact certified by UL.

Earlier this month, the Second Circuit affirmed, holding that Board-Tech failed to plausibly allege that Eaton’s placement of the “UL 20” mark on its product labelling was literally false.  The mark merely communicated that the product was certified by UL, which Board-Tech conceded was true.

Board-Tech contended that the use of the “UL 20” mark necessarily implied, falsely, that any given product bearing the mark would meet the UL 20 standard, but the Second Circuit disagreed:  “The use of the UL 20 mark on Eaton’s products represents that a sampling of those products complied with UL standards when UL tested the products.  It does not represent that every single unit will perform the same way when tested by different entities.”  To sustain a claim under the false-by-necessary-implication theory of literal falsity, the Court explained, Board-Tech would have needed to show that UL no longer considered Eaton’s products to be compliant with the UL 20 standard.

Watch this space for any 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.

Federal “Spring Water” Standards Runneth Over State Claims

We often cover cases in which false advertising claims brought under state law are challenged as preempted by a federal regulatory scheme.  Poland Spring was a recent target of state law false advertising claims, and successfully obtained the dismissal of those claims on the ground that they were preempted by federal statute.  Patane v. Nestle Waters N. Am., 2018 WL 2271161 (D. Conn. May 17, 2018).

In consolidated actions, putative class action plaintiffs alleged that Poland Spring water is not actually 100% “spring water” as defined under the Food, Drug and Cosmetics Act (FDCA).  The Food & Drug Administration’s regulations define spring water as “deriv[ing] from an underground formation from which water flows naturally to the surface of the earth,” with a “natural force causing the water to flow to the surface through a natural orifice.”  The water may be collected by a tap and with an external hydraulic force, so long as the water has all the physical properties of the water that naturally flows to the surface, and so long as the water is collected by a “hydrogeologically valid method.”  Since the FDCA does not provide a private right of action for the violation of the regulations in question, plaintiffs asserted fraud, breach of contract, and consumer deception claims under various state laws.

The district court (Judge Jeffrey A. Meyer) held that plaintiffs’ claims were preempted by § 337(a) of the FDCA, which provides that only the federal government—not private parties—may enforce FDCA violations.  According to the court, § 337(a) impliedly preempts any claim under state law based solely on a violation of the FDCA.  Plaintiffs’ principal complaint was that Poland Spring did not comply with the FDA’s standards for spring water, and plaintiffs tellingly proclaimed that they sought to enforce those standards in the FDA’s stead.  Since all claims for relief hinged on the alleged non-compliance with FDA standards, all claims were dismissed as impliedly preempted.

Plaintiffs were given leave to replead any proper state claims that are not preempted.  Though not essential to its holding, the court also expounded upon § 343–1(a)(1) of the FDCA, which expressly preempts any state law from imposing any definition of “spring water” that is not identical to the FDCA definition.  According to the court, implied preemption under § 337(a) and express preemption under § 343–1(a)(1) result in a broad preemptive effect under which only a narrow range of state law claims can survive:  “In order to survive preemption, a state law claim must rely on an independent state law duty that parallels or mirrors the FDCA’s requirement for ‘spring water,’ but must not solely and exclusively rely on violations of the FDCA’s own requirements.”  Given the court’s dicta on the combined effect of express and implied preemption, if plaintiffs’ claims in their amended pleadings are again preempted, we might expect dismissal with prejudice.  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.

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