Proskauer on Advertising Law
Proskauer on Advertising Law

First Circuit Affirms No Duty to Disclose Upstream Labor Abuses on Chocolate Packaging

We recently blogged  about a District of Massachusetts decision holding that it was not deceptive for Nestlé to omit from product labels the (alleged) existence of child labor in its cocoa supply chains. The First Circuit recently affirmed this decision, along with decisions dismissing identical lawsuits against Mars and The Hershey Company. The First Circuit concluded that the chocolate companies’ failure to disclose this information on product packaging did not constitute a violation of the Massachusetts Consumer Protection Act (MCPA). Tomasella v. Nestle, Nos. 19-1130 – 19-1132 (1st Cir. June 16, 2020).

Despite condemning the exploitation of children in the cocoa bean supply chain, the Court cabined its inquiry to the narrow question of whether the failure to disclose on packaging information about upstream labor abuses constitutes an unfair or deceptive business practice under the MCPA.

The Massachusetts Supreme Judicial Court has not directly addressed whether, and to what extent, an omission tangential to a product’s fitness for use constitutes a deceptive act. Therefore, the First Circuit looked to the FTC’s guidance, noting that the MCPA states it is to be interpreted in accordance with the FTC’s interpretation of the FTC Act. The First Circuit explained that the FTC recognizes omissions give rise to liability as a deceptive act in two limited circumstances: (1) when a seller “tell[s] only half the truth, and [] omit[s] the rest,” and (2) when a seller simply remains silent under circumstances giving rise to a misleading impression.

In the First Circuit’s view, Defendants’ silence did not fall into either category. Instead, it constituted a non-actionable “pure omission,” which the FTC has defined as “a subject upon which the seller has simply said nothing, in circumstances that do not give any particular meaning to his silence.” The Court rejected Plaintiff’s contention that Defendants’ failure to correct at the point of sale Plaintiff’s “false, pre-existing conception” that their chocolate products were completely free of the worst forms of child labor creates deception liability. The Court explained that “[d]eclaring Defendants’ packaging omissions to be deceptive would inevitably ‘expand [ ] that concept virtually beyond limits,’ considering the vast universe of ‘erroneous preconceptions’ that individual consumers may have about any given product, as well as ‘[t]he number of facts that may be material to [them].’”

The First Circuit’s decision in Tomasella is not the first to find that advertisers have no affirmative duty to disclose upstream labor abuses in the product’s supply chain. In other putative class actions challenging advertisers’ failure to disclose such practices, courts have likewise declined to hold that such omissions violate consumer protection laws. See, e.g., Hodsdon v. Mars, 891 F.3d 857 (9th Cir. 2018). 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.

 

No “White” Lie: Plaintiffs Fail to Show Reasonable Consumer Would Expect “White Morsels” to Contain White Chocolate

After the recent dismissal  of nearly identical claims, the same consumer plaintiffs have once again been thwarted in their attempt to challenge labeling and advertising that supposedly misleads consumers into believing the product contains white chocolate. Prescott v. Nestle USA, Inc., No. 19-CV-07471-BLF (N.D. Cal. June 4, 2020).

Here, the plaintiffs alleged that Nestle’s use of the words “white” and “premier” to describe its Toll House’s Premier White Morsels would deceive a reasonable consumer into thinking that the product actually contains white chocolate, when it does not. Plaintiffs asserted claims under three California laws: the UCL, FAL, and CLRA.

In dismissing Plaintiffs’ claims, Judge Beth L. Freeman cited the “highly persuasive” decision in Cheslow v. Ghirardelli Chocolate, No. 19-CV-07467-PJH (N.D. Cal. Apr. 8, 2020), dismissing “nearly identical claims” asserted by the same plaintiffs against Ghirardelli regarding its Premium Baking Chips Classic White Chips.

As we noted in our blog post covering the Cheslow decision, challenges to literally true advertising in class action cases are particularly vulnerable to a motion to dismiss. In cases where the ingredient list resolves any potential misinterpretation of a literally true claim, consumer plaintiffs face an uphill battle. Judge Freeman’s decision in Prescott reinforces this idea.

In addressing the use of the word “white” on the product labeling, the Court echoed the Cheslow court’s analysis of modifying adjectives on food labels. Judge Freeman discussed Cheslow’s reliance on Becerra v. Dr. Pepper/Seven Up, 945 F.3d 1225 (9th Cir. 2019), which found that in light of the commonly understood definition of the word “diet” when used as an adjective, the word “diet” in “Diet Dr. Pepper” spoke to the product’s lack of calories, and did not promise weight loss or management. Applying this reasoning, the court held that “[n]o reasonable consumer could believe that a package of baking chips contains white chocolate simply because the product includes the word ‘white’ in its name or label.”

Judge Freeman also found little merit in plaintiffs’ argument that the use of “premier” was misleading. Relying on the Cheslow court’s finding that the use of “premium” in the context of “Premium Baking Chips” and “premium ingredients” constituted puffery, the court similarly reasoned that “premier” in the context of “Toll House’s Premier White Morsels” was “mere puffery that cannot form the basis of a claim under the reasonable consumer standard.”

In a creative attempt to bolster their allegations, plaintiffs included in their First Amended Complaint a number of consumer comments taken from topclassactions.com, which supposedly reflected that other consumers likewise thought the product contained white chocolate. However, the court found that such “subjective opinions…posted in the context of asking to join this lawsuit are irrelevant” to “the [applicable] reasonable consumer standard as discussed in Becerra and Cheslow.”

This case is the first we have seen where plaintiffs have tried to rely on consumer postings on a class action recruitment website to support their allegation that reasonable consumers will be deceived by the challenged advertising. However, given Judge Freeman’s persuasive reasoning as to why such postings are irrelevant, we doubt this will become a trend. Judge Freeman’s order indicated that leave to amend was appropriate, as the decision was “the first guidance offered by the Court.” 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.

A Legen-dairy Victory: Ben & Jerry’s Wins “Happy Cows” False Advertising Lawsuit

Earlier this summer, the District Court of Vermont dismissed a false advertising lawsuit alleging that Ben & Jerry’s claims that it sources dairy products from “happy cows” on “Caring Dairy” farms were materially misleading. Ehlers v. Ben & Jerry’s Homemade, No. 2:19-cv-00194 (D. Vt. 2020).

The plaintiff interpreted the “happy cow” and “Caring Dairy” statements on Ben & Jerry’s ice- cream cartons and website to mean that all milk used in Ben & Jerry’s ice-cream is sourced from “happy cows” and “Caring Dairy” farms. To this consumer’s alleged disappointment, the milk used in Ben & Jerry’s products is actually a mixture of Caring Dairy farms and mass production facilities. As a result, the plaintiff brought claims for violation of the Vermont Consumer Protection Act, breach of express warranty, and unjust enrichment.

The district court found that plaintiff did not plausibly allege a violation of the VCPA because the statement was neither material nor misleading. Plaintiff interpreted a heading on a single Ben & Jerry’s webpage—“Basic standards for being a Caring Dairy farmer (required for all farmers)”—as meaning that “Caring Dairy” standards apply to all farmers who supply Ben & Jerry’s. The Court rejected this interpretation, noting that nothing accompanying that representation suggests that Ben & Jerry’s sources its products exclusively from Caring Dairy farms. In fact, other sections of the website explicitly negate plaintiff’s contentions—for example, a statement that “the number of Caring Diary farms fluctuates each year.” Emphasizing that context is crucial to determine whether a representation is misleading, the Court concluded that Plaintiff could not rely solely on his own faulty interpretation in a vacuum and ignore the relevant context to support a plausible claim of actual misrepresentation.

 Plaintiff also alleged the representations constituted a breach of express warranty and/or resulted in unjust enrichment. However, both allegations failed. As to the warranty claim, the Court found the advertiser’s use of “happy” merely constituted the seller’s opinion, rather than an objective statement that could form the basis of the bargain. That sounds sensible, given the inherent difficulty in interviewing the cows for confirmation. The court further noted that even if Plaintiff could plausibly plead a material breach, he could not show that the Ben & Jerry’s ice cream he purchased was worthless because of said breach.

The Court’s decision reinforces the importance of context in determining the reasonable consumer takeaway of an advertising claim. When plaintiffs ignore context and claim to have taken away an objectively unreasonable message, their complaint is ripe for a motion to dismiss.

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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.

 

 

Seventh Circuit Cans District Court Injunction in Beer Brands Corn Syrup Suit

Last month, the Seventh Circuit reversed a district court’s decision preliminarily enjoining Anheuser-Busch from making various advertising claims related to the absence of corn syrup in Bud Light, including that Bud Light has “no corn syrup,” that Molson Coors’s competing Miller Lite and Coors Lite beers are “made with” or “brewed with” corn syrup, and that Bud Light has “100% less corn syrup” than the Molson Coors beers. Molson Coors Beverage v. Anheuser-Busch, Case Nos. 19-2200 et al. (7th Cir. 2020). We previously blogged about the complaint in this case (the plaintiff was identified by its previous name, Miller Coors) and the case’s procedural history.

The thrust of Molson Coors’s challenge is that Anheuser-Busch’s claims about Bud Light, while literally true, imply that Miller Lite and Coors Lite contain corn syrup. Supposedly, those claims are misleading because corn syrup is merely used in the brewing process of Miller Lite and Coors Lite, but is not actually present in the final products. The district court opinion found Molson Coors had shown a sufficient likelihood of success on the merits to warrant granting a preliminary injunction.

The Seventh Circuit rejected the district court’s reasoning, observing that Molson Coors itself identifies corn syrup as an “ingredient” in both Miller Lite and Coors Lite. While Molson Coors argued that its list of “ingredients” differs from what the final products “contain,” the Seventh Circuit pointed out that testimony from some of the company’s own managers equated the two. Moreover, the Bud Light advertising and packaging did not claim that Miller Lite and Coors Lite “contain” corn syrup, but merely “made statements from which some consumers doubtlessly infer that some corn syrup avoids fermentation and makes it into the beer.” Given that Molson Coors’s own statements (in the form of ingredients lists) yielded the same inference, the court refused to enjoin Anheuser Busch’s claims, stating that “it is not “false or misleading . . . for a seller to say or imply, of a business rival, something that the rival says about itself.”

The Seventh Circuit’s opinion suggests that advertisers seeking to make comparative claims about competitors may be able to insulate themselves from a false advertising challenge by drawing on claims and disclosures made by the competitor. 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.

Judge Dismisses Half-Baked False Advertising Claims Against Ghirardelli

On April 8, 2020, Judge Phyllis J. Hamilton of the U.S. District Court for the Northern District of California granted Ghirardelli Chocolate’s motion to dismiss a putative nationwide class action brought by several consumers who alleged Ghirardelli deceptively marketed its “premium classic white” baking chips as containing white chocolate. Cheslow v. Ghirardelli Chocolate, No. 19-CV-07467-PJH, 2020 WL 1701840 (N.D. Cal. Apr. 8, 2020).

The complaint alleged that Ghirardelli’s labeling, advertising, and marketing of its “premium classic white” baking chips deceived “reasonable consumers into thinking ‘white’ represents the type of chocolate in the product, i.e., white chocolate,” when in fact the product did not contain chocolate. Plaintiffs asserted violations of California’s Unfair Competition Law, False Advertising Law, and the Consumer Legal Remedies Act. Ghirardelli moved to dismiss the complaint on the grounds that it did not contain any allegations that plausibly show that the product advertising made any statements or representations that were false or misleading.

As a preliminary matter, both sides agreed that there was no affirmative statement or representation on the product that was false. Specifically, the product label did not include the words “chocolate” or “cocoa.” Therefore, the court explained that Plaintiffs carried the burden of proving that the product had “the capacity, likelihood, or tendency to deceive the consuming public.” Applying that standard, the court granted Ghirardelli’s motion and dismissed all of Plaintiffs’ claims because they did not plausibly allege a reasonable consumer would be deceived by the product’s labeling or advertising.

With respect to Plaintiffs’ contention that consumers would reasonably understand “white chips” to refer to white chocolate, the court drew on two recent Ninth Circuit opinions and sided with Ghirardelli, which argued the description simply referred to the color of the chips. Beginning with the dictionary definition of the allegedly deceptive term, as suggested by Becerra v. Dr. Pepper/Seven Up, 945 F.3d 1225 (9th Cir. 2019) (a case this blog covered), Judge Hamilton found that the adjective “white” in “white chips” does not define the food itself but rather defines the color of the food. Any contrary interpretation of the word by plaintiffs was unreasonable, the court held, and therefore could not form the basis of a false advertising claim under Ebner v. Fresh. In Ebner, the Ninth Circuit held that a representation regarding a product is not deceptive merely because it may be “unreasonably misunderstood by an insignificant and unrepresentative segment of the class of persons that may purchase the product.” 838 F.3d 958 (9th Cir. 2016) . Here, “[s]imply because some consumers unreasonably assumed that “white” in the term “white chips” meant white chocolate chips does not make it so.” This was especially true because the package disclosed the product ingredients, resolving any potential for misinterpretation as to the contents of the product.

Judge Hamilton also rejected Plaintiffs’ argument that the product’s label was misleading because it included images of white chocolate chips and baking recipes. Although “deceptive images, especially when combined with deceptive statements, may deceive a reasonable consumer,” the court explained that it is “unreasonable to draw a specific qualitative message about the product from an image on the product.” Thus, although the package included an image of a cookie with white chips, the court held that it was not reasonable for a consumer to conclude anything “about the quality of those chips” because the packaging “makes no affirmative statement that it is a chocolate cookie.”

Finally, Judge Hamilton did not buy Plaintiff’s argument that the use of the word “premium” in the phrase “premium baking chips” conveyed to consumers that the product was real white chocolate made with premium ingredients. Rather, it was mere puffery and thus not actionable.

This opinion is a reminder – like other cases we have covered – that challenges to literally true advertising statements are likely to provoke a motion to dismiss and that such motions are often granted. This is particularly the case where an ingredient list resolves any potential misinterpretations that a consumer may derive from the contested claims. Continue to 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.

Seventh Circuit Finds No Evidence of Deception in Aloe Vera Gel Labeling Lawsuit

Last month, a Seventh Circuit panel unanimously affirmed the district court’s grant of summary judgment dismissing a consumer class action alleging that Fruit of the Earth and its retailer clients deceptively labeled aloe vera gel products. Beardsall v. CVS, 19-1850 (7th Cir. Mar. 24, 2020).

Defendants’ aloe vera products are labeled as “Aloe Vera 100% Gel” and “100% Pure Aloe Vera Gel” followed by an asterisk, with a disclaimer stating that the product includes stabilizers and preservatives to ensure potency and efficacy. The product labels also tout aloe vera’s therapeutic benefits, including relief of sunburn. Plaintiffs alleged in their complaint that the labeling was deceptive for three reasons, all of which were rejected by the district court on summary judgment.

First, Plaintiffs argued Defendants’ products contain a low concentration of acemannan, a chemical compound found in aloe vera responsible for its therapeutic qualities. According to Plaintiffs, it was therefore misleading to characterize the products as “100%” aloe vera and to market them as providing the therapeutic effects associated with ale vera gel, as no reasonable consumer would purchase an aloe vera product containing low concentrations of this compound. However, Plaintiffs offered no survey or other evidence that acemannan concentration matters to consumers, and the Seventh Circuit therefore affirmed the district court’s holding that Plaintiffs failed to carry their burden in a false advertising case of showing that the labeling would be materially misleading to reasonable consumers.

Second, Plaintiffs claimed Defendants’ aloe vera products did not achieve the therapeutic effects claimed on the product labels. This argument was similarly unavailing because again, Plaintiffs did not produce any evidence that Defendant’s products lack therapeutic efficacy. The Seventh Circuit rejected Plaintiffs’ argument that Defendants should be required to demonstrate the products’ effectiveness, noting that this got the burden of proof backwards.

Third, Plaintiffs took issue with Defendants’ claims that their products were “100%” aloe vera. Plaintiffs argued Defendants’ label descriptions “Aloe Vera 100% Gel” and “100% Pure Aloe Vera Gel” suggested its products were of “high quality” or “especially effective.” But the Seventh Circuit found no evidence of this interpretation by consumers, nor evidence that a certain amount of acemannan is needed for an aloe vera product to be called “100% pure.” The court also rejected Plaintiffs’ contention that, due to the inclusion of stabilizers and preservatives in the products, Defendants’ “100%” labeling violated state consumer fraud laws because it did not comply with an FDA regulation stating that the labeling of a cosmetic “may be misleading” by bearing a “name which includes or suggests the name of one or more but not all such ingredients, even though the names of all such ingredients are stated elsewhere in the labeling.” Notwithstanding this regulation, the Seventh Circuit deemed the “presence of other substances in the product—and the disclosure of those products in the ingredients list—[ ] irrelevant” because of Plaintiffs’ concessions that small amounts of acemannan were “acceptable” and even “expected,” and that “no plaintiff took the label to mean that there was absolutely nothing other than aloe vera in the bottle.”

In light of Plaintiffs’ many evidentiary shortcomings, the Seventh Circuit affirmed summary judgment in favor of Defendants. This decision is a reminder that if a class action complaint making farfetched allegations of false advertising manages to survive a motion to dismiss under the lenient pleading standard, untenable theories of false advertising will often fail at the summary judgment stage if the plaintiffs lack any evidence to support their 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.

Fifth Circuit Rains on Plaintiff’s Parade, Vacates Award in Dispute over Windshield Water Repellant Ad

Last month, a Fifth Circuit panel vacated in part a judgment in a false advertising case that disgorged the defendant’s profits, awarded corrective advertising damages under the Lanham Act and enjoined the disputed claims. Illinois Tool Works v. Rust-Oleum, 955 F.3d 512 (5th Cir. 2020). The panel held that the plaintiff failed to show the defendant’s profits were attributable to the Lanham Act violation, as is required, and that the plaintiff offered no basis for the corrective advertising award.

The origins of the lawsuit lie in an advertisement by defendant Rust-Oleum for its RainBrella windshield water repellant, which claimed that RainBrella lasts for 100 washes and lasts twice as long as Rain-X, a competing product made by Illinois Tool Works (ITW). ITW sued, alleging that Rain-X was all wet in that those claims were false, and a jury awarded ITW $1.3 million, partly in disgorgement of defendant’s profits and partly for ITW expenditures for corrective advertising. The district court reduced the corrective advertising award from $925,617 to $329.505.75 (a figure representing a quarter of Rust-Oleum’s advertising expenses) and permanently enjoined Rust-Oleum from making its advertising claims. Both parties appealed.

On appeal, ITW defended the disgorged profits award on the ground that the benefit Rust-Oleum derived from the advertising was demonstrated by 1) witness testimony regarding the importance of the advertising claims to Rust-Oleum, 2) the large number of people who saw the commercial, and 3) the fact that RainBrella was placed on nearby shelves in the same stores as Rain-X. The Fifth Circuit panel was unconvinced, holding that none of these facts showed a causal connection between Rust-Oleum’s alleged false advertising and its profits, and therefore vacated the disgorgement award.

Not surprisingly, the panel also vacated the award of money for ITW to run future corrective advertising since, as the panel noted, ITW had never asserted that it planned to run corrective advertising. In addition, ITW had presented no information to the jury from which to derive the amount required for corrective advertising, or even to show that its product had suffered a reputational harm such that corrective advertising was necessary. ITW argued that it was not required to show the necessity of an award for corrective advertising in light of Rain-X’s “40 years of goodwill and tens of millions of dollars in advertising,” as well as Rust-Oleum’s expenditures in advertising RainBrella. The panel found these arguments unavailing, as none of them showed any loss to ITW. In such circumstances, the award did not compensate the plaintiff – the goal of a Lanham Act award – but rather provided a windfall.

Finally, the panel vacated the district court’s injunction of the “100 washes” claim. In order to obtain injunctive relief, ITW was required to demonstrate not only that the advertisement was misleading to a substantial portion of consumers, but also that the deception was material to consumers’ purchasing decisions. The panel rejected ITW’s argument that the claim concerned an inherent quality of the product, and therefore did not require a showing of materiality, noting that the argument relied on out-of-circuit cases that conflicted with Fifth Circuit precedent. It also declined to find that the importance of the claim to Rust-Oleum’s marketing strategy provided evidence of the claim’s materiality.

The case demonstrates that Lanham Act damages cannot be based upon innuendo, but require substantive proof of a connection between the plaintiff’s harm and the award. It is also a reminder that not all circuits have adopted the “inherent quality” alternative test for materiality, and in those circuits direct proof that the alleged deception is material to consumers’ purchasing decisions is still required.

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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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