Proskauer on Advertising Law
Proskauer on Advertising Law

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.

Second Circuit Finds Consumer Suit Against Dunkin’ Not Well Done

A Second Circuit panel recently affirmed the dismissal of a putative false advertising class action against Dunkin’ Brands, which alleged the company misled consumers as to the contents of products Dunkin’ described as “Angus steak.” Chen v. Dunkin’ Brands, 18-cv-3087 (2d Cir. Mar. 31, 2020). The complaint asserted claims under various state consumer protection laws, including New York General Business Law (“GBL”) §§ 349 and 350. The district court dismissed the non-New York plaintiffs for lack of personal jurisdiction, and found the complaint failed to state a claim under the GBL.

The plaintiffs alleged Dunkin’ deceptively marketed two of its trademarked products: the Angus Steak & Egg Breakfast Sandwich and the Angus Steak & Egg Wake-Up Wrap. Plaintiffs claimed that, through representations made in labeling and television advertisements, Dunkin’ deceived consumers into believing that these products contained an “intact” piece of meat, when the products actually contained a ground beef patty with additives.

The complaint identified three allegedly misleading television advertisements that showed actors holding the products, which were described using the words “Angus” and “steak.” However, the panel noted that all three advertisements concluded with multiple zoomed-in images that clearly showed the “steak” was a beef patty. Because no GBL claim can stand if the allegedly deceptive practice is fully disclosed, the panel concluded that the district court properly decided as a matter of law that the advertisements were not actionable under the GBL. Additionally, the district court’s dismissal was supported by the dictionary definition of steak, which includes both “a slice of meat” and “ground beef prepared for cooking or for serving in the manner of a steak.”

It was also undisputed that the two products did in fact contain “Angus beef” (that is, beef derived from the Angus breed of cattle). While literally accurate statements can still be misleading, the court emphasized the importance of context in determining whether a reasonable consumer would have been misled by a particular advertisement. In this case, the plaintiff bought the Angus Sandwich for less than $4 and the Angus Wrap for less than $2. As the television advertisements showed, the products were marketed and sold as ‘grab-and-go products’ that could be consumed in hand, without the need for a fork and knife. The court concluded that a reasonable consumer purchasing one of the products from Dunkin’ in that context would not be misled into thinking she was purchasing an unadulterated, intact piece of meat.

This decision is another in a long line of cases from the Second Circuit and other circuit courts (including cases we have covered on this blog) recognizing that common sense and the ordinary meaning of words are key considerations when a court assesses the plausibility of a false advertising complaint at the motion to dismiss stage.

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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 Clarifies Standing Requirements for Damages Classes

In a decision that will have repercussions for consumer false advertising lawsuits, a Ninth Circuit panel recently ruled in a Fair Credit Reporting Act (“FCRA”) case that all class members must have standing at the trial stage of a class action for monetary damages. Ramirez v. TransUnion, LLC, 951 F.3d 1008 (9th Cir. 2020). Continue Reading

Single Communication-Based False Advertising Claim Permitted to Proceed

A recent decision out of the District of Massachusetts serves as a reminder that a court may consider even a single communication by an advertiser made directly to a consumer to be advertising under the Lanham Act, particularly where the advertiser competes in a limited market. Allscripts Healthcare v. DR/Decision Res., No. CV 19-11038-NMG, 2020 WL 837444 (D. Mass. Feb. 20, 2020). Continue Reading

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