Proskauer on Advertising Law
Proskauer on Advertising Law

Split Eleventh Circuit Panel Eliminates Incentive Awards for Class Representatives

Last month, in a split decision, the Eleventh Circuit reversed a district court’s incentive award to the named plaintiff in a class action alleging willful violations of the Telephone Consumer Protection Act. In doing so, it may have rung the death knell on class action incentive awards in that Circuit. Dickenson v. NPAS Solutions, No. 18-12344 (11th Cir. Sept. 17, 2020).

Named plaintiff Charles Johnson brought a putative class action against Defendant NPAS Solutions in the Southern District of Florida, alleging NPAS called him and other putative class members through its automated dialing systems without their consent. The suit quickly proceeded to settlement, where the class obtained a $1.4 million recovery, including a $6,000 incentive award for Johnson. The district court preliminarily approved the settlement, and set a deadline for class members to object. Class member Jenna Dickenson objected but the district court overruled her objections and approved the settlement.

On appeal, writing for the majority, Judge Kevin C. Newsom agreed with Dickenson that the Supreme Court’s decisions in Trustees v. Greenough, 105 U.S. 527 (1882)  and Central Railroad & Banking v. Pettus, 113 U.S. 116 (1885) make clear that while plaintiffs suing on behalf of a class can be reimbursed for attorneys’ fees and expenses incurred in carrying on the litigation, they cannot be paid a salary or be reimbursed for personal expenses. The majority determined that modern day incentive awards are even more troubling than the prohibited salary and expense reimbursements because they are “intended not only to compensate class representatives for their time (i.e., as a salary), but also to promote litigation by providing a prize to be won (i.e., as a bounty).” Accordingly, the Court reversed the incentive award.

Judge Beverly B. Martin dissented on the ground that categorically prohibiting incentive awards will reduce the willingness of potential class representatives to take on litigation. Instead, citing precedent from the Eleventh Circuit and other Circuit courts, Judge Martin took the position that incentive awards should be evaluated on a case-by-case basis to determine whether they are fair and whether they create a conflict between the named plaintiff and other class members.

The Eleventh Circuit appears to be the only Circuit to date to have banned incentive awards to compensate class representatives for their time and for bringing a lawsuit. But this decision may not be the final word. On October 22, Johnson filed a petition urging the Eleventh Circuit to review this panel decision en banc. Johnson argued in his petition that the panel’s categorical prohibition against incentive awards conflicts with the law in every other Circuit and diverges from long-standing class action practice. The Eleventh Circuit has not yet ruled on this petition. Watch this space for further developments.


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Conagra Slips Away from Parkay Oil Spray Serving Size Claims

Conagra Brands recently emerged victorious when Judge William H. Orrick of the U.S. District Court for the Northern District of California granted summary judgment in its favor, tossing claims that the company disguises the fat and calorie content of its Parkay Spray vegetable oil spray product (“Parkay”) with artificially small serving sizes. Allen v. Conagra Foods, No. 3:13-cv-01279 (N.D. Cal. Aug. 12, 2020).

According to plaintiffs, Parkay contains a significant amount of fat and calories, which Conagra avoids disclosing by using a serving size “so ridiculously small” that Conagra is able to “round down the disclosed amount of fat to zero.” Plaintiffs alleged Parkay’s “0 fat,” “fat free,” and “0 calories” claims therefore violated California’s CLRA, UCL, and other state consumer protection laws.

The case turned on the categorization of the product under FDA regulations, which set different serving sizes for “Fats and Oils: Butter, margarine, oil, shortening” as opposed to “Fats and Oils: Spray types.” Treating Parkay as a “Spray type” product, Conagra labels it with a serving size of 0.25 grams. According to Plaintiffs, Parkay should be categorized as “Fats and Oils: Butter, margarine, oil, shortening,” for which the FDA requires a larger serving size of one tablespoon.

The Court explained that to the extent Plaintiffs’ claims sought to impose requirements beyond those required by FDA regulations, they were preempted, noting “[w]hether or not the plaintiffs would ultimately be able to prove that the Parkay label misleads or deceives consumers . . . the federal regulations set the standard for food labeling.”

Plaintiffs argued Parkay “must belong in the butter/margarine category [with the larger serving size] because (i) Conagra intends Parkay Spray to be used as a buttery topping, (ii) Conagra markets Parkay Spray as an alternative to butter for foods like corn and bread, and (iii) consumers in fact use Parkay Spray as a topping.” Conagra responded that Parkay consists of soybean oil suspended in water, is dispensed via a spray pump, and is therefore literally a “spray-type fat and oil.”

Based on the summary judgment record, the Court found it was not possible to conclude Parkay belongs in the butter/margarine category. The Court noted FDA describes the “butter, margarine, oil, and shortening” grouping as consisting of four types of fats and oils “used interchangeably in food preparation.” Plaintiffs’ own expert testified to the myriad differences between Parkay and butter/margarine, and stated Parkay is a poor substitute for butter or margarine in baking or sautéing. Relying on this testimony, the Court found Parkay cannot be “used interchangeably” with butter or margarine, and therefore the plaintiffs’ claims sought to enforce state law requirements that are “not identical to” federal food labeling requirements, and were preempted.

This decision underscores the FDA’s broad regulatory authority over the labeling of food and beverage products, which cannot be circumvented by bringing claims under state law. Watch this space for further developments.


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Judge Dunks Plaintiffs’ Claims and Dismisses Oreo False Advertising Lawsuit

Judge Edward R. Korman of the U.S. District Court for the Eastern District of New York recently granted Mondelēz Global’s motion to dismiss a putative class action challenging the advertising for its signature Oreo cookies. Harris v. Mondelēz Global, No. 19-cv-2249-ERK (E.D.N.Y. July 28, 2020).

Plaintiffs alleged the Oreo manufacturer’s front label statement “Always Made With Real Cocoa” is misleading because the cocoa used to make Oreos is refined through an alkalizing process. Although Plaintiffs conceded Oreos are in fact made with cocoa, they claimed “the addition of alkali diminishes the quality and taste of the cocoa” and that a reasonable consumer would expect “‘real cocoa’ to indicate a higher quality cocoa than if the ingredient been identified just as ‘cocoa’ (minus the ‘real’).” Plaintiffs asserted claims under various state deceptive or misleading business practices statutes and for unjust enrichment.

Cutting to the core of Plaintiffs’ claim, Judge Korman found Plaintiffs’ failure to dispute that Oreos contain cocoa to be “fatal to their case.” Plaintiffs relied on Mantikas v. Kellogg to argue that technical accuracy does not dispel a plaintiff’s claim that conduct is plausibly deceptive. In Mantikas, the Second Circuit found the phrase “Made with Whole Grain” in Cheez-Its advertisements falsely implied the products contained more whole grain than white flour. Judge Korman distinguished Mantikas because Plaintiffs did not allege that the Oreo label misrepresents the quantity or proportion of cocoa, or that the amount of cocoa is de minimis relative to the amount of alkali.

Judge Korman explained “a representation that a food is ‘made with’ a ‘real’ ingredient does not necessarily mislead from the truth that the advertised ingredient may have been combined with another.” Drawing on examples from other cases concerning mashed potatoes advertised as “made with real butter” (while containing additional fats) and graham crackers packaged as “made with real honey” (while also containing other sweeteners), the Court explained that the Oreo label did not foreclose the use of other ingredients. A reasonable consumer viewing the words “made with real cocoa” on the Oreo label would not expect the cocoa to be present in any particular form or not mixed with other ingredients, particularly in the absence of any modifiers like “only” or “exclusively” before the phrase “real cocoa.”

Based on this analysis, the Court held Plaintiffs failed to plausibly allege that a reasonable consumer would be misled by a made with “real cocoa” representation when the product did in fact contain cocoa, and dismissed Plaintiffs’ claims. The Court denied Plaintiffs’ leave to amend because their complaint’s “substantive problem could not be cured through better pleadings.”

This case once again demonstrates that claims based only on consumer assumptions unsupported by the text of the advertising are ripe for a motion to dismiss. That’s just how the cookie crumbles. Continue to watch this space for further developments.


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Court Gives Vanilla Ice Cream False Advertising Claims a Frosty Reception

Judge Louis L. Stanton of the Southern District of New York recently granted defendant Wegmans Food Markets’motion to dismiss claims alleging that Wegmans falsely labels its vanilla ice cream. Plaintiffs sued Wegmans for false advertising, negligent misrepresentation, and deceptive acts in violation of federal and state law, alleging that despite labeling its product “vanilla ice cream,” the product contains only a negligible amount of vanilla, and to the extent it tastes like vanilla, this flavor comes from non-vanilla sources. Therefore, plaintiffs argued, this product could not “truthfully or lawfully” be labeled “vanilla ice cream.” The Court, however, held that because plaintiffs conceded that there is at least a de minimis amount of vanilla in the product, no objective misrepresentations had been pled, and dismissed plaintiffs’ claims. Steele v. Wegman’s Food Markets, No. 1:19-cv-09227 (S.D.N.Y. July 14, 2020). Continue Reading

Split Ninth Circuit Panel Vacates $24M Judgment in Hospital Gown Advertising Class Action

A split Ninth Circuit panel recently overturned a $24 million judgment in a class action lawsuit against Kimberly-Clark and its spinoff, Halyard Health. Bahamas Surgery Center v. Kimberly-Clark et al., No. 18-55478 (9th Cir. July 23, 2020).

Plaintiff class representative Bahamas Surgery Center accused the defendants of misrepresenting the effectiveness of their surgical gowns at stopping the spread of disease. According to plaintiff, defendants falsely represented that their surgical gowns were compliant with the Association for the Advancement of Medical Instrumentation (AAMI) industry standard, but failed to disclose testing failures that in fact rendered them noncompliant. Based on these allegations, the district court allowed Plaintiffs to pursue class claims for fraudulent concealment and violation of California’s Unfair Competition Law. At trial, the jury found defendants violated these laws and awarded the class $450 million in compensatory and punitive damages. The district court subsequently reduced this award, entering judgment in the amount of $24 million. Continue Reading

Burger King Wins “Whopper” of a Case: Federal Court Finds No Promise of Method of Preparation in Advertisements for Meatless Burger

Judge Raag Singhal of the Southern District of Florida recently granted Burger King’s motion to dismiss a putative class action challenging its advertising for its plant-based “Impossible Burger,” and its motion to deny class certification. Williams v. Burger King, No. 19-24755 (S.D. Fla. July 20, 2020).

Plaintiffs alleged Burger King’s advertisements for its non-meat “Impossible Burger” led them to believe the burger would be prepared separately from Burger King’s meat items. According to plaintiffs, they later learned Burger King cooks Impossible Burgers on grills that are also used to cook meat. They then filed this lawsuit alleging breach of contract, unjust enrichment, and violation of Florida, New York, California, Michigan, and Georgia consumer protection laws. Continue Reading

Added Allegations of Consumer Survey Results Fail to Sweeten the Deal: Court Dismisses “White Chips” False Advertising Suit With Prejudice

We previously blogged about the dismissal without prejudice of a putative consumer class action alleging that the well-known confectioner Ghirardelli misled consumers into believing its “Premium Baking Chips Classic White Chips” contained white chocolate. Last month, Judge Phyllis J. Hamilton of the Northern District of California once again dismissed plaintiffs’ claims against Ghirardelli – this time, with prejudice — holding that the amended complaint failed to cure the original complaint’s critical defects. Cheslow v. Ghiradelli Chocolate Company, No. 19-cv-07467 (N.D. Cal. July 17, 2020). Continue Reading