Proskauer on Advertising Law
Proskauer on Advertising Law

Suit Over Use of American Heart Association Certification Mark Maintains a Pulse

Is it deceptive to label food products with the mark of the American Heart Association (“AHA”) without disclosing that the AHA was paid for use of its certification mark? This was the question raised by a putative class action lawsuit in the Northern District of New York, which largely survived dismissal on March 25, 2019. Warner v. StarKist Co., 18-406 (N.D.N.Y. 2019). The court found that plaintiff had adequately stated his claims under New York state statutes and common law, but held that he did not have standing to seek injunctive relief. The defendant filed a motion for reconsideration last month.

Defendant StarKist Co. is a producer of seafood products, a number of which bear the “Heart-Check Mark,” a white checkmark in a red heart accompanied by the statement: “American Heart Association – CERTIFIED – Meets Criteria for Heart-Healthy Food.” The complaint alleged StarKist does not disclose that it paid the AHA to place the mark on its products, and that inclusion of the mark on labels is therefore misleading as an undisclosed paid-for endorsement. In addition to claims for deceptive practices under GBL § 349 and false advertising under GBL § 350, the complaint included claims for dealing in misbranded food and for unjust enrichment.

StarKist moved to dismiss, arguing that its use of the Heart-Check Mark is not materially misleading because the information it contains is accurate – the StarKist product meets AHA’s certification standards. The court rejected this argument, noting that the complaint alleges the labelling is misleading because StarKist does not disclose that it pays an annual fee to the AHA to use the mark, and that StarKist failed to argue that this omission would not mislead a reasonable consumer. Although StarKist noted that the AHA discloses on its website that participants in the Heart-Check program pay administrative fees to the AHA, the court declined to take judicial notice of this part of the AHA website.

The court also rejected StarKist’s argument that the unjust enrichment claim was duplicative of the GBL claims. Because the elements for an unjust enrichment claim are different from those for either a deceptive practices or a false advertising claim, and Starkist did not argue that the plaintiff failed to plausibly allege facts to support unjust enrichment, the court denied dismissal of this count “in an abundance of caution.”

The ruling was not a complete victory for the plaintiff, however, with the court accepting StarKist’s argument that the plaintiff lacked standing for injunctive relief because he did not allege a future harm. It noted a split of authority within the Second Circuit as to whether plaintiffs in the consumer protection context must allege a future injury in order to be eligible for injunctive relief, and determined that such an allegation was necessary. Because plaintiff did not explicitly allege that he was at risk of future injury, and was now aware of StarKist paying for use of the Heart-Check mark, there was no real and immediate threat of future injury.

This decision, while only a denial of a motion to dismiss, underscores the importance for advertisers to consider whether the use of certification marks that require payment could be considered misleading where the fact that use of the mark requires a fee is not communicated to the consumer. It also adds to the growing body of case law grappling with the question of when injunctive relief is available in consumer protection actions – a subject that the Supreme Court recently declined to address, as we covered in a previous post. Given that no resolution on the issue of injunctive relief appears to be forthcoming from the nation’s highest court, this will be an area to monitor closely.

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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.

Justin Timberlake Waves Bai Bai Bai to Partially Dismissed “No Artificial Flavors” Beverage Mislabeling Suit

Last month, a judge in the Southern District of California partially dismissed a putative class action against beverage company Bai Brands, LLC (“Bai”) and related defendants. Branca v. Bai Brands, LLC, No. 18-00757 (S.D. Cal. 2019). Plaintiff Kevin Branca filed this lawsuit against Bai, its parent company Dr. Pepper Snapple Group, Inc. (“DPSG”), the CEOs of both these companies, and Bai investor Justin Timberlake, alleging that they violated California and federal statutes and state consumer protection laws by labeling Bai drinks as containing “NO artificial flavors” and as being “naturally flavored” when they allegedly contain an artificial form of malic acid, and by failing to identify this form of malic acid by its scientific name in the product ingredients list. In granting in part defendants’ motion to dismiss, the court held that it lacked jurisdiction over the individual defendants, including Timberlake, and that defendants were not required to list beverage ingredients by their scientific names. However, the court declined to dismiss plaintiff’s claims that it was false and misleading to label the beverages as containing “NO artificial flavors” and as being “naturally flavored,” leaving defendants Bai and DPSG to defend those claims.

The product labels of the Bai beverages in dispute indicate that they contain malic acid. According to plaintiff, malic acid can take one of two forms: (1) 1-malic acid, which occurs naturally and is found in certain fruits and vegetables, and (2) d-1-malic acid, which is chemically manufactured. Plaintiff alleged that Bai’s products contain the latter, and that defendants were therefore required to identify the ingredient on the product label by its scientific name “d-1-malic acid,” rather than simply by its common name “malic acid.” The court, however, disagreed, finding that FDA regulations “specifically instruct that ingredients should be listed by their common or usual name,” and plaintiff’s contention that defendants were required to do something different is preempted.

The court also dismissed Timberlake and the other individual defendants from the lawsuit on the grounds that they are not California state residents, and their roles as corporate officers or agents of the corporate defendants did not confer specific personal jurisdiction over them. In addition, plaintiff’s consumer protection claims were dismissed to the extent they were barred by the 3-year statute of limitations for CLRA and FAL claims, or the 4-year statute of limitations for UCL and breach of warranty claims. Branca purported to assert claims on behalf of a class of individuals who purchased products as far back as 2012, but did not file his lawsuit until April 2018. In defense of these claims, Branca argued that he and other putative class members had to rely on the manufacturer’s labeling and therefore could not have discovered defendants’ allegedly deceptive practices earlier than April 2018. The court rejected these arguments, instead agreeing with defendants that the CLRA and FAL claims were barred to the extent they arose prior to April 2015, and the UCL and breach of warranty claims were barred to the extent they arose prior to April 2014.

But defendants were not able to drink up a total victory. In declining to dismiss plaintiff’s claims that the Bai beverages should have been labeled as “artificially flavored,” and that it was deceptive to label them as containing “NO artificial flavors” and as “naturally flavored,” the court found the complaint sufficiently pled that the products contained the manufactured form of malic acid. Defendants argued that, regardless, malic acid is not used as a “flavor” but rather as an acidulant (an ingredient that makes food more acidic and serves as a pH control agent), and therefore under federal regulations could not be described on the product label as an “artificial flavor.” The court acknowledged that FDA regulations distinguish between a “flavor” (which imparts a distinctive flavor of its own) and a “flavor enhancer” (which has no distinctive flavor of its own, but intensifies flavors from other ingredients), but found that plaintiff sufficiently pled in this case that malic acid was a “flavoring ingredient,” and that whether it was in fact an “artificial flavor” was a factual determination that the court could not make on a motion to dismiss. Bai and DPSG are therefore still left to defend this claim.

Watch this space as we continue to cover how courts are grappling with what constitutes an “artificial flavor.”

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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.

California Court Sours on Starbucks Gummies Lawsuit

Several months ago we covered two Second Circuit decisions that addressed false advertising claims related to ingredients and product labeling of foods, which reached differing results. Applying similar principles, a recent decision from the Southern District of California found that Starbucks’ packaging for its sour gummy candies did not reasonably suggest that the candies were made with all natural ingredients. Brown v. Starbucks Corp., No. 18-2286 (S.D. Cal. 2019).

In her complaint, on behalf of a putative nationwide class, plaintiff alleged that the packaging of Starbucks’ “Sour Gummies” candies was misleading because it suggested that the candies contain only natural ingredients. Plaintiff pointed to language stating “Apple, watermelon, tangerine and lemon flavored candies.” She argued that by omitting the fact that the candies contained artificial flavoring from the front of the package, while invoking the names of different fruits that the candies taste like, the packaging misleadingly implied that the candies were naturally flavored. Starbucks moved to dismiss.

The court granted Starbucks’ motion, finding that a reasonable consumer would not be misled by the Sour Gummies’ packaging. To start, the court observed that nothing about the statements on the front of the packaging was literally false because the candies were in fact flavored with fruit juice concentrates. The court then gave several reasons why “common sense” dictated that a reasonable consumer would not understand the gummies’ packaging as indicating that there were no artificial ingredients in addition to the concentrate: first, the term “flavored” implied that the candies contained artificial ingredients; second, unlike in decisions cited by the plaintiff, there were no statements or images on the packaging that affirmatively suggested that the product was all natural; and third, the product’s appearance—“a brightly-colored, gelatinous candy”—was clearly visible to the consumer through the transparent packaging and was inconsistent with the notion that it was made only with natural ingredients.

The reasoning in Brown offers an instructive contrast with the Second Circuit’s decision in Mantikas v. Kellogg Company, 910 F.3d 633 (2d Cir. Dec. 11, 2018). In Mantikas, the court was faced with packaging that prominently stated that the product contained whole grain, despite the fact that the grain content was mostly enriched flour. While the defendants argued that the ingredient list would indicate to a reasonable consumer that enriched flour was the predominant ingredient, the court found that consumers should not be expected to consult an ingredient list to correct a contradictory statement made on the front label. The Sour Gummies packaging, on the other hand, contained no such affirmative statements on its front label that a reasonable consumer might rely upon to assume that the product is all natural.

Thus, Brown is more akin to Jessani et al v. Monini North America, 744 Fed. Appx. 18 (2d Cir. Dec. 3, 2018), where the Second Circuit held that a reasonable consumer would not believe that Monini’s mass produced, modestly-priced olive oil was made with actual white truffle, “the most expensive food in the world.” Similarly, in Brown, Judge Miller drew on the overall context of the Sour Gummies to determine that no reasonable consumer would think that a vividly colored gummy candy was made with all natural ingredients.

Together, these decisions underscore the importance of both language and context in determining whether a product’s packaging would reasonably mislead consumers about its ingredients. Brown is also significant because it represents the first decision, to our knowledge, to find that the word “flavored” implies that a product contains artificial ingredients. Whether other courts adopt that reasoning remains to be seen, but if so it would give advertisers another argument in favor of dismissing similar ingredient-related false 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 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 Denies Review of Class Certification in Beer Labeling Brouhaha

In a 2-1 decision memorialized in a one-page order, a Ninth Circuit panel recently denied Kona Brewing’s request for leave to appeal a grant of class certification to a consumer class claiming that the company’s branding deceptively communicated the false message that Kona beer is brewed in Hawaii. Broomfield v. Craft Brew Alliance, No. 18-80145 (9th Cir. 2019).

Plaintiffs claimed that by giving Hawaiian names to its beers such as “Hanalei Island IPA” and “Kanaha Blonde Ale,” and incorporating images of Hawaiian scenes on its beer bottle labeling, Kona Brewing communicated the false message that its beers were brewed in Hawaii when they actually are brewed in New Hampshire and Tennessee.

In its petition for permission to appeal the class certification order, Kona argued that the District Court rubber stamped plaintiffs’ argument that the class of purchasers all gleaned the same material, misleading message from the imagery on the packaging, even though the issue of whether class-wide liability can be predicated solely upon imagery is one of first impression in the Ninth Circuit. Kona also argued that the District Court’s evaluation of plaintiffs’ proposed conjoint analysis for class-wide damages was insufficiently probing, and that the District Court failed to appreciate deficiencies in plaintiffs’ damages model.

The panel majority denied Kona’s petition, issuing a one-sentence order citing without further explanation to a previous Ninth Circuit decision, Chamberlan v. Ford Motor Co., 402 F.3d 952 (9th Cir. 2005). Under Chamberlan, the Ninth Circuit cautioned that permitting an interlocutory appeal under Rule 23(f) should be a “rare occurrence,” and is only justified when: (1) there would be a death knell situation for either party absent review – that is, where the certification decision would effectively end the litigation by making it prohibitive for one of the parties to continue; (2) the petition presents unsettled and fundamental issues of law related to class actions; or (3) there is a manifest error in the district court’s certification decision.

Judge Gould, in dissent, opined that at least two of the Chamberlan criteria were present. He wrote that “certification may cause the defendant unduly to feel pressed to reach a settlement without regard to merits because of the size of the California market for beer.” He also wrote that certification could resolve the issues raised by appellant, which he viewed as important unsettled legal questions.

The decision underscores the difficulties defendants of class action lawsuits face if they are unsuccessful in resisting class certification at the district court level. As Judge Gould noted, class certification shifts the dynamics of a case, pressuring defendants to settle rather than endure costly litigation in order to achieve end-of-case review. In this sense, a grant of class certification may be dispositive of a case despite being unconnected to the merits of the 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 partners in Proskauer’s False Advertising & Trademark practice and editors of Proskauer on Advertising Law, which was recently named to the ABA Journal’s Web 100 for 2018.

Ninth Circuit Sends Brain-Booster Claim Case Back to District Court

After Ninth Circuit review, it remains to be seen whether a nutritional supplement maker can claim that ginkgo biloba leaf extract and vinpocetine supplements improve “alertness,” “mental clarity, and memory” in the face of contradictory scientific studies. In Korolshteyn v. Costco Wholesale, No. 17-56435 (2019), the Ninth Circuit reversed a district court order granting summary judgment in favor of the defendants, the seller and manufacturer of a nutritional supplement called TruNature Ginkgo Biloba with Vinpocetine nutritional supplement. The Ninth Circuit held that the lower court applied too tough a standard in evaluating plaintiffs’ complaint.

Ginkgo biloba leaf extract and vinpocetine are ingredients used in supplements advertised to improve mental acuity. But plaintiffs in this putative class action alleged that defendants’ supplement did not provide those benefits, and that therefore, defendants’ labeling was false and deceptive California’s UCL and CLRA. In their complaint, plaintiffs referenced “well-controlled randomized clinical trials… that [show] Ginkgo biloba and vinpocetine supplementation does not provide any mental clarity, memory or mental alertness benefits.”

Nevertheless, Judge Cathy Ann Bencivengo of the Southern District of California held that, to survive summary judgment on UCL and CLRA claims, plaintiff must establish factual evidence of literal falsity, which the court construed as requiring more than a showing that “the clear weight of the credible scientific evidence and the consensus in the scientific community” supported a finding of falsity. Rather, the court held that plaintiffs must show that the scientific evidence of falsity is unequivocally in their favor. Because the defendants cited conflicting studies supporting their label statements, the court reasoned that the evidence was equivocal, and therefore the plaintiff could not prevail.

On appeal, the Ninth Circuit reversed and remanded, ruling that the more lenient standard for UCL and CLRA claims recently articulated in Sonner v. Schwabe N. Am., 911 F.3d 989, 992 (9th Cir. 2018), should apply. That case—which also involved false advertising claims about ginkgo biloba—held that plaintiff has “the burden of proving by preponderance of the evidence that a challenged advertisement is false or misleading under the UCL and CLRA.” Id. Thus, to survive summary judgment, plaintiff need only provide “expert testimony and other scientific data” that shows Ginkgo biloba has no more of an effect on mental acuity than a placebo, notwithstanding the existence of contradictory studies offered by the defendant.

Watch this space as we monitor how, if at all, Sonner and Korolshteyn impact California false advertising class actions against supplement sellers and manufacturers.

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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 partners in Proskauer’s False Advertising & Trademark practice and editors of Proskauer on Advertising Law, which was recently named to the ABA Journal’s Web 100 for 2018.

Third Circuit Shreds Plaintiff’s Credit Card Receipt Case On Standing Grounds

The Third Circuit recently held that procedural violations of the Fair and Accurate Credit Transactions Act (“FACTA”), absent any showing of concrete harm, do not meet Article III standing requirements.  Kamal v. J. Crew Group, 2019 WL 1087350 (3rd Cir. 2019).

Plaintiff Ahmed Kamal commenced a suit against J. Crew Group after making purchases at various J. Crew retail stores.  Kamal’s receipts allegedly violated FACTA because they contained the first six and last four digits of his credit card number as well as the name of his card issuer.  Although Kamal conceded that neither his identity nor his credit card number were ever stolen, he maintained that the printing of FACTA-prohibited information and the resulting increased likelihood of identity theft constituted the concrete harm necessary for Article III standing.  Judge William J. Martini of the United States District Court for the District of New Jersey disagreed, and granted J. Crew’s motions to dismiss for lack of standing.

Affirming the district court’s decision, the Third Circuit panel evaluated Kamal’s standing arguments in light of the Supreme Court’s 2016 decision in Spokeo v. Robins, 136 S.Ct. 1540 (2016).  In Spokeo, the Supreme Court explained that “Article III standing requires a concrete injury even in the context of a statutory violation.”

The Third Circuit panel held that Kamal’s claims were “conclusory” and relied on a “highly speculative chain of future events” whereby identity thieves first had to obtain his credit card receipts, decipher the remaining credit card numbers, and then use his credit card information to commit fraud. In so holding, the court noted that amendments to FACTA in the Clarification Act of 2008 limited FACTA only to claims “implicating actual harm.”  Indeed, Kamal had not even alleged disclosure of his information to a third party, so his claim could not be analogized to the common law privacy torts of unreasonable publicity or breach of confidence.  Bolstering its decision, the court cited holdings in the Second, Seventh, and Ninth Circuits which dismissed FACTA allegations on similar standing grounds.  Emphasizing that Kamal never claimed actual disclosure to third parties, the court distinguished an Eleventh Circuit opinion finding concrete injury on common law breach of confidence grounds.  See Muransky v. Godiva Chocolatier, 905 F.3d 1200 (11th Cir. 2018).

Kamal’s core reasoning applies equally in the false advertising context.  Merely being exposed to false advertising is not enough for Article III standing.  Rather, a plaintiff must plausibly allege, and ultimately prove, that the defendant’s false advertising caused him or her a concrete harm.  We anticipate that Spokeo and its progeny will continue to impact how false advertising class actions are litigated.  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 partners in Proskauer’s False Advertising & Trademark practice and editors of Proskauer on Advertising Law, which was recently named to the ABA Journal’s Web 100 for 2018.

Snack Bar Class Action Powers On After USDA Action and FDA Inaction

Unlike a fine wine, a snack bar does not get better with age. Neither, apparently, does litigation. Last month, Judge William H. Pauley III in the Southern District of New York lifted a years-long stay in a lawsuit against KIND LLC concerning the allegedly false marketing of KIND snack products as “all-natural” and “non-GMO.” In re KIND LLC “Healthy and All Natural” Litigation, No. 15-MD-2645. As we blogged about previously, the “all-natural” claims were originally stayed in 2016 in light of ongoing FDA rulemaking regarding the use of “natural” labeling, and the “non-GMO” claims were subsequently stayed in early 2018 pending the USDA’s establishment of a national disclosure standard for bioengineered food. In December 2018, the USDA promulgated its “non-GMO” rules through the National Bioengineered Food Disclosure Standard, which became effective in February 2019. The FDA, however, is continuing its lengthy deliberative process. In considering this delay, Judge Pauley concluded that “[i]t is time for this multi-district litigation to move forward.”

Plaintiffs filed this lawsuit in 2015, alleging that KIND deceptively marketed certain products as “all-natural” and “non-GMO” even though they purportedly contain synthetic and genetically modified ingredients, in violation of New York and other state laws. In September 2016, Judge Pauley stayed the “all-natural” claims pursuant to the doctrine of primary jurisdiction, to wait for the FDA rulemaking process to run its course and provide guidance on the definition of the term “natural.” In March 2018, the Court also granted KIND’s motion to stay the “non-GMO” claims pending USDA action on a national disclosure standard for bioengineered food, which was expected to occur in July 2018. At the same time, the Court denied plaintiffs’ motion to lift the stay of the “all natural” claims. In doing so, Judge Pauley recognized the “glacial pace” of the FDA in defining the term “natural.” However, because there was a significant interest in litigating the “all natural” and “non-GMO” claims together, the Court continued to stay the “all natural” claims, but only through August 15, 2018—two weeks after the date on which the USDA was expected to promulgate the “non-GMO” standard. In doing so, the Court noted that the justification for lifting the stay on the “all natural” claims would be “substantially stronger” if the FDA failed to provide guidance by this date.

The USDA promulgated its “non-GMO” rules through the National Bioengineered Food Disclosure Standard on December 21, 2018. The Court therefore found in its February 2019 decision that there was no reason to continue the stay as to plaintiffs’ “non-GMO” claims. However, all parties were in agreement that the “non-GMO” claims should not proceed without the “all natural” claims, again putting at issue whether the stay of the “all natural” claims should be lifted as well, despite the continued absence of FDA guidance on the definition of the term “natural.” Judge Pauley noted that courts have split on the question of whether to lift similar stays of “natural” claims pending FDA rulemaking: some have declined to do so, others have lifted stays, and some have chosen not to stay these types of claims at all. But citing his prior determination that if the FDA provided no further guidance by August 2018, “the basis for lifting the stay w[ould] be substantially stronger, and that there was no reason to continue to stay the “non-GMO” claims, the Court concluded that the stay of the “all natural” claims should be lifted in this case. As a result, this lawsuit that began in 2015 will now proceed to discovery.

In the meantime, KIND petitioned the FDA last week to update its regulations on nutrient content labeling because, in KIND’s view, current regulations permit manufacturers to use nutrient content labeling in a way that misleads the public by concealing the use of added sugars and trans fats in products marketed as contributing to a healthy diet. Watch this space for further developments in-KIND.

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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 partners in Proskauer’s False Advertising & Trademark practice and editors of Proskauer on Advertising Law, which was recently named to the ABA Journal’s Web 100 for 2018.

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