Proskauer on Advertising Law
Proskauer on Advertising Law

Third Circuit Affirms Decision to Reject FTC’s False Advertising Claims Against Housing Insulation Company

A Third Circuit panel recently affirmed a Pennsylvania district court decision in favor of defendant Innovative Designs (“IDI”) in an advertising challenge by the FTC. We previously blogged about the district court decision, which found the FTC failed to present any credible expert testimony to support its claims. On appeal, the Third Circuit panel affirmed, finding  the FTC failed to show that IDI’s advertising claims were not scientifically supported. FTC v. Innovative Designs (3d Cir. July 22, 2021).

IDI manufactures and sells Insultex House Wrap, a weather-resistant barrier used in building construction. The insulation power of house wrap products is determined through the product’s R-value, a measure of the product’s ability to restrict the flow of heat. The higher the R-value, the higher the product’s insulation power. IDI advertised that Insultex had an R-value of either R-3 or R-6. The FTC alleged IDI overstated the R-value of its products because “(1) IDI did not use the standard ASTM C518 test to yield its purported R-values,” and standard ASTM C518 testing “did not yield IDI’s claimed results.” Instead of the standard ASTM C518 test, the FTC alleged IDI used a modified ASTM test to yield the advertised R-values.

The Court found that to prevail on a lack of substantiation theory, the FTC must identify the evidence that the advertiser should have to support its claim in the relevant scientific community, and then prove that the substantiation the advertiser claims to possess would not satisfy the relevant scientific community. Here, the Court found the FTC’s arguments failed because the FTC did not establish that the modified ASTM test did not comply with the standard ASTM C518 testing; the Court noted ASTM C518 testing explicitly contemplates that variations of the standard method may be acceptably used. In addition, the FTC failed to prove that the modified test would not satisfy the relevant scientific community, and failed to show “through expert testimony or otherwise” that the modified test yielded inaccurate results.  The Court clarified that the burden fell on the FTC to prove that the testing would not be acceptable to the relevant scientific community, not on IDI to prove that it would.

Like the district court decision, the Third Circuit’s opinion reinforces the importance of scientific evidence, including through a properly vetted expert witness, where the advertising claims at issue are highly technical, and where the FTC’s theory of falsity hinges on a lack of substantiation.

The Rise and Fall of “Vanilla” Labeling Challenges

Beginning in 2020, the advertising world saw an explosion of putative class-actions challenging the use of “vanilla” to describe products where the vanilla flavoring allegedly is not derived exclusively from the vanilla bean plant.  We previously blogged about several such cases. One plaintiff’s attorney alone, Spencer Sheehan, has filed—and continues to file—hundreds of these cases.  However, we suspect this trend will begin to subside, as courts have largely disposed of these cases at the pleading stage. Two recent decisions out of the Northern District of California and Eastern District of New York illustrate the challenges plaintiffs’ lawyers face in keeping these lawsuits afloat.  Garadi v. Mars Wrigley, No. 19-cv-03209-RJD-ST (E.D.N.Y. July 6, 2021); Fahey v. Whole Foods Market, Inc. et al., No. 20-cv-06737-JST (N.D. Cal. June 30, 2021).

In Fahey v. Whole Foods, plaintiff alleged that the labeling of Whole Foods’ 365 Organic Unsweetened Almond Vanilla Beverage was false and misleading because the vanilla flavor is derived from synthetic vanillin, rather than from the vanilla bean plant.  Similarly, in Garadi v. Mars Wrigley, plaintiffs alleged they were deceived by the word “vanilla” on the packaging of Dove-brand ice cream bars because the flavor does not come exclusively from vanilla beans or extract.  Plaintiffs in both cases contend they would not have purchased the products, or would have paid less, had they been aware of the true composition, and brought claims under the consumer protection laws of their respective states.

Citing district courts around the country, the court in Fahey held that the word “vanilla” standing alone (without any qualifying terms) would not be likely to mislead a reasonable consumer into believing that the product’s vanilla flavor came exclusively or predominantly from vanilla beans.  The court noted that its conclusion was bolstered by the fact that the product label lacked any phrases or images, such as “made with,” that would lead a reasonable consumer to understand “vanilla” to be referencing an ingredient rather than a flavor.  The court also concluded that survey data referenced by the plaintiff was not enough to overcome this deficiency, noting that plaintiff failed to provide any information about how the survey was conducted, what questions were asked, or how many consumers participated.  On these grounds, the court granted Whole Foods’ motion to dismiss.

In the same vein, the court in Garadi found that plaintiffs failed to plausibly allege that a reasonable consumer acting reasonably under the circumstances would be misled by the phrase “vanilla ice cream.”  Instead, the court found that the product’s label merely indicates that the ice cream is vanilla flavored.  Absent allegations that the ice cream does not taste like vanilla, the Garadi court also found plaintiffs’ claims to be ripe for dismissal.

These decisions are unsurprising, as numerous “vanilla” cases previously failed at the pleading stage.  However, while new “vanilla” cases may no longer be the “flavor of the month” among members of the plaintiff’s bar, we don’t expect flavor-related litigation to disappear any time soon. Plaintiffs’ lawyers have recently set their sights on claims involving other flavor profiles, such as “strawberry,” “fudge,” “smoked,” “lemon,” “butter,” and “lime.” 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.

“Champion” Petfoods: Seventh Circuit Affirms Dismissal of False Advertising Suit Against Pet Food Company

We recently blogged about Champion Petfoods’ success in a Minnesota district court case alleging that it misrepresented the quality of its dog food and ingredients. Well, Champion Petfoods came back to defend its title in another case involving nearly identical allegations, this time in the Seventh Circuit. The Seventh Circuit recently affirmed a Wisconsin district court decision granting summary judgment in favor of Champion Petfoods. In doing so, the Court sent a loud message to contenders that “summary judgment is the proverbial ‘put up or shut up’ moment in a lawsuit.” Here, plaintiff’s failure to “put up” evidence in support of his claims cost him a shot at trial. Weaver v. Champion Petfoods USA Inc., No. 120-2235 (7th Cir. June 30, 2021).

Champion Petfoods’ packaging touts “biologically appropriate” dog food made with “fresh regional ingredients” prepared in their “award-winning kitchens”—“never outsourced.” Plaintiff alleged these claims were false and misleading because, according to plaintiff: 1) there is a risk that Champion’s dog food contains BPAs and pentobarbital; 2) Champion uses frozen ingredients, regrinds refreshed ingredients, and includes ingredients that are past their expiration date; 3) Champion receives ingredients from international sources like New Zealand, Norway, and Latin America—far away from its Canada and Kentucky kitchens; and 4) Champion purchases ingredients from third-party sources.

The Court, however, found plaintiff’s evidence insufficient to back his claims. In particular, the plaintiff provided neither consumer survey evidence nor expert testimony to support his liability case (though he submitted two expert reports on damages). Instead, plaintiff based his claims entirely on his own testimony. The Court found this was not enough to survive summary judgment.

First, plaintiff’s testimony alone was not enough to convince the Court that a reasonable consumer would believe “biologically appropriate” meant completely BPA-free, especially given (1) Champion does not add BPA to its dog food, and (2) humans and animals are commonly exposed to BPA. Champion also submitted unrebutted expert testimony that the levels of BPA in its food could not harm a dog. The Court also found plaintiff lacked standing to bring a claim that any dog food he purchased contained pentobarbital, because the sole source of any potential pentobarbital contamination would have come months after plaintiff stopped purchasing Champion’s dog food.

Plaintiff’s testimony was also insufficient to persuade the Court that a reasonable consumer would be misled into believing that “local and fresh ingredients” means the food contains exclusively local and fresh ingredients. The Seventh Circuit quoted the district court’s reasoning in Song v. Champion (a decision we previously blogged about), that “just as a statement that mashed potatoes are made with ‘real butter’ does not imply that the only fat used is real butter, and just as a statement that graham crackers are made with ‘real honey’ does not imply that the only sweetener used is real honey, so too the statement that a bag of dog food contains ‘fresh regional ingredients’ does not imply that it is composed exclusively of ingredients that are fresh and regional.” The Court thus found that Plaintiff’s own expectation that the dog food ingredients would come solely from regional sources was not enough to prove that other consumers were misled in the same way, especially since Champion never claimed its ingredients were 100% regionally sourced.

This case is a reminder that while class action plaintiffs sometimes are permitted to get away with “because I say so” at the pleading stage, far more is required at summary judgment.

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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.

 

Let it “Bee”: Ninth Circuit Affirms Dismissal of Trader Joe’s Manuka Honey Advertising Suit

A Ninth Circuit panel recently affirmed dismissal of a putative consumer class action alleging Trader Joe’s misleadingly labeled its store brand honey as “100% New Zealand Manuka Honey,” where plaintiffs’ pollen content testing showed that only about 60% of the honey was derived from Manuka flower nectar. In doing so, the Court reinforced the importance of considering context (including a reasonable consumer’s background knowledge) in evaluating whether advertising would be likely to mislead a reasonable consumer. Moore v. Trader Joe’s Co., No. 19-16618 (9th Cir. July 15, 2021).

Under the FDA’s Honey Guidelines, “Manuka Honey” is the “common or usual name” for honey whose “chief floral source” is the Manuka bush, a plant native to Australia and New Zealand. Plaintiffs conceded that Trader Joe’s labeling is consistent with these guidelines. Even still, plaintiffs maintained that “100% New Zealand Manuka Honey” could nonetheless mislead consumers into thinking that the honey was “100%” from Manuka flower nectar. As noted, plaintiffs commissioned pollen content testing that showed nearly half of the honey was derived from other non-Manuka flower nectar.

The Court of Appeals noted the “100%” in the “100% New Zealand Manuka Honey” label could be read in multiple ways: “100% could be a claim that the product was 100% Manuka honey, that its contents were 100% derived from the Manuka flower, or even that 100% of the honey was from New Zealand.” To determine if this ambiguity would mislead a reasonable consumer, the Ninth Circuit panel relied on precedent from multiple federal appellate courts supporting “the general principle that [courts considering] deceptive advertising claims should take into account all the information available to consumers and the context in which that information is provided and used.”  The panel also noted, “information available to a consumer is not limited to the physical label and may involve contextual inferences regarding the product itself and its packaging.”

Here, the Court found three key contextual inferences would dissuade a reasonable consumer from adopting the “unreasonable or fanciful” belief that the product consists solely of honey derived from the Manuka flower: (1) the impossibility of making a honey that is 100% derived from one floral source; (2) the low price of Trader Joe’s Manuka Honey; and (3) the presence of the “10+” on the label.

First, the Court explained that because of the well-known “foraging nature of bees” any reasonable consumer would know it is impossible to completely control what flowers a bee visits – making it impossible to produce a honey 100% derived from one floral source.

Second, the Court considered the price of Trader Joe’s Manuka Honey relative to the cost of products containing higher concentrations of Manuka-derived honey. Trader Joe’s honey costs $13.99 per jar ($1.59 per ounce), while a jar of honey 92% derived from Manuka costs around $266 ($21.55 per ounce). Given this dramatic price difference, the Court found any consumer aware of the market for Manuka honey could not reasonably expect a $13.99 jar of honey to be “100%” derived from Manuka flower nectar. In support of its reasoning, the Ninth Circuit cited the Second Circuit’s decision in Jessani v. Monini – a lawsuit where Proskauer successfully represented the makers of “white truffle flavored” olive oil. There, the Court found it was “simply not plausible that a significant portion of the general consuming public acting reasonably would conclude that [the defendant’s] mass produced, modestly-priced olive oil was made with ‘the most expensive food in the world.’”

Third, the Court turned to the “10+” on the product label. Although the Court noted there are “no other details on the jar about what ‘10+’ means, the presence of this rating on the label puts a reasonable consumer on notice that it must represent something about the product.” In fact, the “10+” refers to the honey’s Unique Manuka Factor (UMF) score, which measures a Manuka honey product’s concentration of honey derived from Manuka flower nectar. The Court observed that reasonable consumers of Manuka honey would routinely encounter such ratings and would likely have some knowledge about them – and any consumer with even a cursory knowledge of the UMF scale would know Trader Joe’s Manuka Honey was decidedly on the lower end of the scale, which ranges from 5+ to 26+.

The Court thus held “a reasonable consumer would be left only with the conclusion that ‘100% New Zealand Manuka Honey’ means that it is 100% honey whose chief floral source is the Manuka plant, which is an accurate statement.”

While some district courts in the Ninth Circuit can be unduly hesitant about dismissing at the pleading stage complaints alleging unreasonable interpretations of advertising, Moore is a reminder that “where plaintiffs base deceptive advertising claims on unreasonable or fanciful interpretations of labels or other advertising, dismissal on the pleadings may well be justified.”  Moore is also a reminder that in advertising law, context is king—or perhaps queen, in the case of the honey bee.

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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.

 

 

Court Considers FTC’s Ability to Seek Monetary Relief Post-AMG

Earlier this year, we blogged about the Supreme Court’s decision in AMG v. FTC, which significantly curtailed the FTC’s ability to seek monetary restitution under Section 13(b) of the FTC Act.  One quick update there: The U.S. House of Representatives recently voted to restore the FTC’s Section 13(b) disgorgement powers.  For now, though, in the absence of any action by the Senate, the FTC remains without that power.

Recently, Judge Dolly M. Gee of the District Court of the Central District of California considered the FTC’s post- AMG ability to seek monetary relief under a different provision of the Act. Though the court ultimately found the FTC could not do so on the particular facts of the case, Judge Gee’s decision left open the possibility that the FTC may, in theory, seek monetary relief under Section 19 of the FTC Act for violations of the Restore Online Shoppers’ Confidence Act (“ROSCA”). FTC v. Cardiff, No. 18-cv-2104 (C.D. Cal. June 29, 2021). However, because ROSCA claims are fairly limited in scope, this decision does not create the possibility of rendering the Supreme Court’s AMG decision a dead letter; there still exist substantial categories of FTC suits for which monetary relief is not permitted, absent an act of Congress.

The FTC alleged defendants, the marketers of smoking cessation products, enrolled consumers who purchased their products in a “monthly autoship program,” through which defendants shipped (and charged customers for) products without their consent. Based on these allegations, the FTC sued defendants under ROSCA, which prohibits charging consumers for goods sold online through an opt-out program unless consumers receive clear notice and a simple mechanism to cancel. Noting “[c]onsumers had to take an affirmative step to cancel the autoship program, and even when they took this step, they were not always able to effectuate a cancellation,” the court previously granted summary judgment to the FTC on its ROSCA claim. In the instant proceeding, the court considered damages owed to the FTC.

While the Supreme Court’s decision in AMG curtailed the FTC’s ability to seek restitution under Section 13(b), the FTC argued it could still seek monetary relief under Section 19. Section 19 authorizes the FTC to sue directly in federal court to obtain relief for unfair or deceptive acts or practices. Observing that Section 19 defines the available relief broadly, so as to include “the refund of money or return of property” and “the payment of damages,” the court agreed that the language in Section 19 plainly authorizes the FTC to seek equitable monetary relief to redress consumer injury resulting from ROSCA violations. It also noted that the Supreme Court’s decision in AMG explicitly stated that “[n]othing” in the decision “prohibits the Commission from using its authority under § 5 and § 19 [of the FTC Act] to obtain restitution on behalf of consumers.”

However, the court nonetheless denied the FTC’s ability to recover monetarily under Section 19 in this particular case, on the ground that the FTC failed to timely disclose its only evidence in support of its computation of ROSCA damages. The court noted that in its papers, the FTC only cited to Section 13(b) of the Act (not Section 19), and did not offer a separate calculation of damages for violations of ROSCA or any other statutes or rules. Finding that the FTC had put “all its eggs in the Section 13(b) basket,” the court determined it was too late for the FTC to pivot to Section 19 to recover damages.

Although the FTC did not succeed in obtaining monetary relief, it did succeed in obtaining injunctive relief against the defendants. The Court held that the FTC was permitted to seek a permanent injunction against defendants under Section 13(b) without first initiating administrative proceedings, because AMG only curtailed its ability to seek monetary relief under Section 13(b). 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.

 

More Than “Puffery”: Claims Against Canada Goose Survive Motion to Dismiss

Judge Victor Marrero of the Southern District of New York recently largely denied a motion to dismiss claims that Canada Goose misled consumers by representing that the fur on Canada Goose jackets is ethically and sustainably sourced. In doing so, the court determined plaintiff’s allegations were “thin,” but viewing the complaint in the light most favorable to plaintiff, found plaintiff had plausibly alleged that a reasonable consumer would be misled. Lee v. Canada Goose US, Inc., No. 20 Civ. 9809 (VM) (S.D.N.Y. June 29, 2021).

In his complaint, plaintiff cited Canada Goose’s representations that the fur was acquired through “ethical, responsible, and sustainable sourcing.” Plaintiff also alleged a tag on the coats referred to Canada Goose’s “Fur Transparency Standard,” and stated that the company purchases fur in accordance with certain third-party standards only from licensed trappers. Plaintiff alleged these representations were misleading, because allegedly inhumane practices like leghold traps and snares are widely used by trappers in the U.S. and Canada.

However, plaintiff did not specifically allege that Canada Goose sources fur from coyotes trapped using these methods. Rather, he alleged that these allegedly inhumane practices were widely used by trappers who abide by standards cited by Canada Goose. While the court found these allegations thin, they were enough to support a reasonable inference that Canada Goose obtained fur from trappers whose methods are inhumane.

But not all of Plaintiff’s claims survived the motion to dismiss. The district court dismissed claims that customers would be misled by Canada Goose’s representations about their (1) compliance with third-party trapping standards and (2) sourcing through licensed trappers. Plaintiff merely alleged that the standards/regulations were themselves inhumane, not that Canada Goose’s statements concerning its compliance were false.  This case represents just one of a recent wave of sustainability-related class action lawsuits. For example, class actions have been filed against:

We encourage our readers to get in touch to discuss strategies for mitigating risk when drafting sustainability-related 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.

The Legal “Pecking Order”: Ninth Circuit Finds Poultry Labeling Claims Preempted

In a unanimous precedential decision, a Ninth Circuit panel recently affirmed the dismissal of a putative class action against Trader Joe’s, which alleged that the statement “Up to 5% Retained Water” on Trader Joe’s poultry product labels was misleading. According to Plaintiff, her independent testing showed Trader Joe’s poultry products contained a higher percentage of retained water.  However, the Ninth Circuit affirmed the district court’s finding that federal law preempted Plaintiff’s challenge to those advertising claims. Webb v. Trader Joe’s, No. 19-56389, 2021 WL 2275265 (9th Cir. June 4, 2021).

As the Ninth Circuit’s decision explained, poultry testing and labeling are federally regulated under the Poultry Products Inspection Act (“PPIA”) and overseen by the Food Safety and Inspection Service (“FSIS”). Importantly, FSIS had already inspected and approved Trader Joe’s “Up to 5% Retained Water” claim. FSIS had also reviewed and declined to object to the testing protocol Trader Joe’s used to obtain the data supporting that claim. And because Trader Joe’s had never publicly published its testing protocol, the Court found Plaintiff had not (and could not) allege that her testing protocol was the same as that used by Trader Joe’s.

On this basis, the Ninth Circuit found Plaintiff’s claims were preempted by the PPIA. Since the FSIS had already reviewed and accepted Trader Joe’s testing protocol and labeling, requiring Trader Joe’s to conform to Plaintiff’s test protocol, or to accept  Plaintiff’s test data, would impose requirements “in addition to, or different than those” required under federal law—namely, the PPIA.

Plaintiff tried to avoid that finding by arguing Trader Joe’s protocol was not “preapproved” by FSIS.  In other words, Plaintiff argued FSIS did not object to the testing protocol, but did not explicitly approve it either.  The Court was not persuaded.  It noted that under the PPIA, Trader Joe’s was only required to make its protocol available to FSIS, which “may object to or require changes” within 30 days.  And under the federal regulatory scheme, FSIS’s decision not to object or otherwise require changes to the protocol constituted federal approval.

Many advertising class actions take issue with labels that are allegedly misleading.  When those labels are subject to a federal regulatory scheme (more commonly the FDCA than the PPIA) in which the federal agency approves or signs off on a subsequently challenged statement, preemption can be a strong basis for a dismissal motion.

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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.

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