Proskauer on Advertising Law
Proskauer on Advertising Law

Seventh Circuit Remands after District Judge Makes Injunction Stickier in Light Beer Corn Syrup Dispute

The Seventh Circuit has remanded a lawsuit concerning beer advertising to the district court for failure to follow required procedures in issuing a preliminary injunction – the latest development in the case’s torturous procedural history. On May 24, 2019, Judge William Conley of the Western District of Wisconsin issued a preliminary injunction banning Anheuser-Busch from suggesting in its advertising that Miller Lite and Coors Lite contain corn syrup. With an interlocutory appeal from the May 24 opinion pending, Judge Conley issued an opinion on September 4, 2019 modifying the injunction, and then on September 6, 2019, modified the modification. The September decisions were noteworthy for expanding the enjoined activity to encompass Anheuser Busch’s use of packaging featuring the literally true statement “no corn syrup.”

Anheuser-Busch launched the advertising campaign at issue during Super Bowl LIII with a television commercial featuring claims that Miller Lite and Coors Lite are “made with” or “brewed with” corn syrup. The campaign also included billboards and print ads stating that Bud Light has “100% less corn syrup”’ than either rival brand, as well as Bud Light packaging prominently featuring the statements “no corn syrup” and “find out what’s in your beer.” MillerCoors argued that these ads deceive consumers into believing that Miller Lite and Coors Lite contain corn syrup and high fructose corn syrup in the finished product, when in fact corn syrup is merely used during the brewing process; according to MillerCoors, it is not present in the final products that reach consumers. MillerCoors sought an order enjoining Anheuser Busch from repeating the corn-syrup claims, blocking airings of all the ads in the corn syrup campaign, and compelling Anheuser-Busch to run corrective advertising. Judge Conley partially granted this request, enjoining Anheuser-Busch from running ads stating that Bud Light contains “100% less corn syrup,” referencing corn syrup without context, and describing corn syrup as an ingredient in in Coors Light or Miller Light, but declining to enjoin ads stating that Coors Lite and Miller Lite “use” or are “made with” or “brewed with” corn syrup. He reserved decision as to whether the injunction should extend to barring the Bud Light packaging claims due to an insufficiently developed record on that issue.

Following further briefing, Judge Conley expanded the preliminary injunction to bar Anheuser-Busch from making the “no corn syrup” and “find out what’s in your beer” claims on Bud Light packaging. In reaching this decision, Judge Conley found that the “no corn syrup” claim could imply that other beers do contain corn syrup. Moreover, he noted that Bud Light together with Miller Lite and Coors Lite comprise nearly 100% of the “premium light beer” market, potentially leading a substantial number of consumers to infer from Bud Light’s packaging that the MillerCoors products in particular contain corn syrup.

Judge Conley rejected Anheuser-Busch’s argument that the claims on Bud Light packaging should be considered separately, rather than as part of the full advertising campaign. While Anheuser-Busch presented survey evidence supporting its argument that consumers did not link the Bud Light packaging to either other beer brands or any statement about corn syrup, MillerCoors’ expert criticized the survey for not presenting the packaging in a retail setting next to MillerCoors products, and for the limited time given to respondents to inspect the packaging. Citing these criticisms, Judge Conley found MillerCoors had demonstrated some likelihood of success in proving that the Bud Light packaging, when displayed next to Miller Lite and Coors Lite packaging and considered in the context of Anheuser-Busch’s full marketing campaign, would mislead consumers into believing the MillerCoors products contain corn syrup. However, in recognition of the fact that the Bud Light packaging did not make any express comparative statements, Judge Conley mitigated the injunction by giving Anheuser-Busch until March 2, 2020 to sell Bud Light using the packaging it had on hand as of June 6, 2019.

In Judge Easterbrook’s 2-1 majority decision, the Seventh Circuit remanded on two procedural grounds. First, it held that all three district court decisions ran afoul of FRCP 65(d) by failing to set forth the injunctions in a document separate from the opinions. Second, the majority found that two of the district court decisions contravened FRCP 62.1 governing procedures for modifying an order that is before the court of appeals, and therefore that the district court lacked jurisdiction over the parts of the case that were on appeal. Judge Hamilton dissented, arguing that the appeal was ready for a decision on the merits, and that the court of appeals should not stand in the way of fast-moving litigation on the basis of procedural issues that prejudiced neither party.

The September decisions are likely to raise eyebrows for the finding that truthful statements on packaging that are not rendered misleading by any other content on the packaging can be found misleading purely by reference to other advertisements in an advertising campaign. They serve as a warning to advertisers to consider advertising claims holistically, examining not only the literal truth of individual claims, but also the potential messages implied by the campaign’s messaging as a whole. The Seventh Circuit’s decision, meanwhile, underscores the importance for litigants of ensuring that court orders conform to procedural requirements. Otherwise, they may find the speedy resolution of their cases impeded for non-substantive reasons.

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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.

Proskauer in San Diego at the 41st Annual ANA/BAA Marketing Law Conference

The Association of National Advertisers and the Brand Activation Association will be hosting their 41st annual Marketing Law Conference at the Marriott Marquis in San Diego, CA from November 4-6. Proskauer is a sponsor of the conference, and will be speaking on two separate panels. Lawrence Weinstein, the co-chair of Proskauer’s Intellectual Property Litigation Group and of our False Advertising and Trademark Practice, and partner Alexander Kaplan will lead a plenary panel titled “A View from the Bench: Federal Judges Discuss their Views of Advertising Litigation and Litigants,” together with Judges Faith Hochberg and Beth Freeman. Associates Jeffrey Warshafsky and Jennifer Yang will also conduct a presentation on what marketing executives need to know to prevent avoidable advertising challenges. If you will be attending the conference, we hope to see you there!

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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.

District Court Judge Finds that Herbal Extract Manufacturer Fails to Capture the Essence of a Lanham Act Claim

In a recent application of the Supreme Court’s 2014 Lexmark decision on standing, Judge Katharine Hayden of the District of New Jersey held last month that an herbal extract manufacturer allegedly misled by its supplier into purchasing diluted saw palmetto extract lacked standing to bring a Lanham Act false advertising claim. Jiaherb, Inc. v. MTC Indus., Inc., No. 18-15532, 2019 WL 4785784 (D.N.J. Sept. 30, 2019).

Jiaherb had purchased all of its saw palmetto extract—$442,262.50 worth—from MTC, a nutritional ingredient supplier and distributor.  Jiaherb alleged that MTC induced it to unknowingly purchase a diluted product cut with hard-to-detect vegetable oils, misrepresenting that the extract was unadulterated.  The complaint alleged injuries to Jiaherb’s “business, reputation, and good will” as well as lost profits due to cancelled orders, and included claims under the Lanham Act, the UCC, and state law theories of liability.

As we have discussed previously, under the first prong of the Lexmark test, a plaintiff must “fall within the zone of interests protected by” the Lanham Act in order to have standing to sue.  While Lanham Act standing is not exclusively limited to direct competitors, “[a] consumer who is hoodwinked into purchasing a disappointing product” falls outside of its zone of protected interests and “cannot invoke the protection of the Lanham Act.” Lexmark Int’l , Inc. v. Static Control Components, 134 S. Ct. 1377, 1390 (2014).

Judge Hayden dismissed Jiaherb’s Lanham Act claim in a short opinion. She noted that the Third Circuit had upheld the dismissal of a case with similar facts in Knit With v. Knitting Fever, Inc. (a case previously covered by this blog), in which a business purchasing yarn from a supplier alleged that the yarn was inferior to what it expected. The Third Circuit in Knit With held the plaintiff did not have standing to sue for a Lanham Act violation, quoting Lexmark’s statement that “[e]ven a business misled by a supplier into purchasing an inferior product is, like consumers generally, not under the Act’s aegis.” Applying the same reasoning, Judge Hayden found that, since Jiaherb characterized its role as that of a consumer of MCT’s products, its alleged injury was merely that of a “consumer-entity that was misled into purchasing a ‘disappointing product.’” This, Judge Hayden noted, “is precisely the type [of injury] that the Lexmark Court excluded from Lanham Act relief.”

However, in a footnote in its opposition brief, Jiaherb had noted that its relationship with MCT might be more analogous to potential competitors.  Based on this possibility, Judge Hayden dismissed plaintiff’s Lanham Act claim without prejudice, allowing for the possibility that Jiaherb might replead to assert a “less limited” relationship.

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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.

Food for Thought: Outcomes of Food Labeling Cases Prove Difficult to Predict

As we wrote recently, the past year has seen a proliferation of lawsuits alleging that food product labels mislead consumers about the product’s ingredients. The trend continued last month, with decisions from the Court of Appeals for the First Circuit and one of its district courts reaching different results on motions to dismiss complaints alleging deceptive food labels.

Last month, the First Circuit reinstated a class action lawsuit against New England Coffee for violation of Massachusetts’ consumer protection laws related to the coffee brand’s label for “Hazelnut Crème” coffee. Dumont v. Reily Foods, 18-2055 (1st Cir. Aug. 8, 2019). Plaintiff alleged that the product name was deceptive because the product did not contain hazelnuts. A Massachusetts federal district court judge dismissed the suit because the complaint lacked sufficient particularized facts to satisfy the heightened pleading standard for fraud allegations.

The First Circuit reversed in a 2-1 decision. The majority noted that although the ingredient list on the product package’s back label read “100% Arabica Coffee Naturally and Artificially Flavored,” reasonable consumers might take different approaches in determining whether the coffee actually contained real hazelnuts. One might check the list of ingredients to ensure the coffee contained hazelnut while others may not, instead relying on the name of the product, without searching the ingredient list, “much like one might easily buy a hazelnut cake without studying the ingredients list to confirm that the cake actually contains some hazelnut.” The majority accordingly concluded that whether the product name implied that the product contained hazelnuts was better suited for resolution “from six jurors, rather than three judges.” In dissent, Circuit Judge Lynch argued that “a reasonable consumer plainly could not view the phrase ‘Hazelnut Crème’ as announcing the presence of actual hazelnut in a bag of coffee which also proclaims it is “100% Arabica Coffee.”

Neither opinion is especially persuasive. As for the dissent, hazelnuts are not coffee, and the fact that a coffee product called “Hazelnut Crème” is said to contain 100% Arabica Coffee does not reasonably rule out the possibility that the product contains hazelnuts. By the same token, however, other courts have concluded that reasonable consumers do not ignore a product’s prominently displayed ingredient list when information on the front label may be viewed as ambiguous concerning whether an ingredient is or is not contained in the product. See, e.g., Jessani et al. v. Monini North America, which one of the authors litigated and which this blog covered. To the extent the Dumont majority suggests otherwise, the opinion would be misguided. That said, whereas the olive oil product in Monini was labeled as “truffle flavored,” here, there was no modifier to suggest that the coffee in question simply tasted, or smelled, like hazelnuts. In such cases, perhaps, one could conclude that the front label lacked ambiguity, and thus would not compel prospective purchasers to search the label further.

Less than a week after the First Circuit’s Dumont decision, Judge Alison Burroughs of the District of Massachusetts tossed a putative class action suit alleging that the advertising and packaging of the cereal “Honey Bunches of Oats” falsely suggested it was sweetened only or primarily with honey, when in fact the main sweeteners are sugar, brown sugar, and corn syrup. Lima v. Post Consumer Brands, 18-12100 (D. Mass. Aug. 13, 2019).The plaintiffs pointed to images of a sun, bee, and honey dipper as representing that honey was the principal sweetener in the cereal. They also cited surveys showing that most consumers believe honey is “better for you than sugar” and that approximately half of consumers are willing to pay more for foods that are primarily sweetened with honey.

In concluding that the consumers failed to state a claim, Judge Burroughs found that plaintiffs had offered no reasonable basis for their alleged belief that the honey references on the packaging implied that honey was the primary sweetener in the cereal rather than simply one of its primary flavors. In addition, even assuming the packaging could be viewed as portraying honey to be an ingredient instead of or as well as a flavor, Judge Burroughs found that plaintiffs still failed to state a claim. She noted that, unlike the “Hazelnut Crème” product in Dumont that did not contain any hazelnut, Honey Bunches of Oats did, in fact, contain honey. She also distinguished the case from Mantikas v. Kellogg, in which the Second Circuit found that a “made with whole grain” claim could imply that the product contained more whole wheat flour than white flour. Here, according to Judge Burroughs, the mere references to honey on the package carried no implication that honey was the primary sweetener, and a reasonable consumer concerned about how the cereal was sweetened would have consulted the cereal’s list of ingredients.

If nothing else, these cases underscore the fact-specific nature of the inquiry as to what product labels imply about their ingredients. Watch this space as decisions continue to clarify the contours of this body of law.

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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.

Plaintiff Fails to Butter Up Court with Mashed Potato Suit

We have previously written about decisions addressing food product labels, and the messages that these labels convey about the products’ ingredients. In Jessani v. Monini, the Second Circuit found that a product label for “white truffle flavored” olive oil did not imply that the product contained actual white truffles. Not long afterwards, the Second Circuit ruled in Mantikas v. Kellogg that the claim “made with whole grain” could be misleading with respect to crackers containing more white flour than whole wheat flour.

Last month, Judge Nicholas G. Garaufis of the Eastern District of New York added to this growing body of case law in an opinion dismissing a putative class action lawsuit against the maker of refrigerated mashed potatoes. Reyes v. Crystal Farms Refrigerated Distribution Co., 19-cv-2250 (E.D.N.Y. 2019). The plaintiff alleged labels claiming that the products are “made with real butter” and “made with fresh whole potatoes” are deceptive because, in addition to containing those ingredients, the products also contain margarine and preservatives. The complaint asserted claims of deceptive business practices and false advertising under New York General Business Law (“GBL”) §§ 349 and 350, as well as claims of fraud, negligent misrepresentation, breach of express and implied warranty of merchantability, and unjust enrichment.

Judge Garaufis first addressed the alleged violations of GBL §§ 349 and 350, which require the defendant to have engaged in conduct that would be materially misleading to a reasonable consumer. Neither of the defendant’s contested statements, according to Judge Garaufis, rose to this level. To begin with, the complaint did not allege that the statements “made with real butter” and “made with fresh whole potatoes” were literally untrue. As the complaint did not dispute, the products do contain butter and whole potatoes.

Judge Garaufis next found that no reasonable consumer would be misled by the product labels. Any reasonable consumer who wondered whether the products that were “made with real butter” also contained margarine could simply look at the ingredient list, which discloses margarine as an ingredient. And it is common knowledge that potatoes must be cooked before being mashed, so no reasonable consumer would assume that the statement “made with fresh whole potatoes” means that the mashed potatoes themselves (rather than the potatoes from which they were made) are “fresh,” as opposed to being preserved.

Judge Garaufis noted that his decision was consistent with, and distinguishable from, the Second Circuit’s decision in Mantikas. Unlike Mantikas, in which crackers “made with whole grain” contained less whole wheat flour than white flour, the plaintiff here did not allege that mashed potatoes “made with real butter” contained less butter than margarine. In addition, while the opinion did not rely on Monini, it is consistent with that ruling too. Like the court in Monini, Judge Garaufis noted that the ingredient list here clarified any possible ambiguity created by the label claims. Moreover, just as the Second Circuit found in Monini that consumers’ awareness of white truffles’ price would prevent them from mistakenly believing truffles were present in a modestly-priced olive oil, Judge Garaufis found that consumers’ knowledge of the mashed potato manufacturing would prevent them from mistakenly concluding such products are “fresh.”

Because the statements were neither false nor misleading, plaintiff’s fraud, negligent misrepresentation, breach of warranty, and unjust enrichment claims were also dismissed.

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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.

Court Lets Trader Joe’s Out of Sticky Situation Over Honey Advertising

A magistrate judge in the Northern District of California recently dismissed a putative class action alleging that Trader Joe’s misled its consumers about the purity of its manuka honey.  Moore v. Trader Joe’s Co., No. 4:18-CV-04418-KAW, 2019 WL 2579219 (N.D. Cal. June 24, 2019).

Plaintiffs commenced a putative class action lawsuit alleging that Trader Joe’s engaged in “false, misleading, and deceptive marketing” by representing that its Trader Joe’s Manuka Honey product was “entirely” manuka honey when, purportedly, the product’s manuka honey content had been “adulterated by the inclusion of cheaper honey.” Manuka honey is produced from the nectar of New Zealand’s manuka tree and is said to have numerous medicinal benefits.

Plaintiffs specifically challenged the product’s “100% New Zealand Manuka Honey” label and the ingredient statement that lists “manuka honey” as the sole ingredient because Plaintiffs’ laboratory tests demonstrated that only between 57.3% and 62.6% of the pollen found in the product was from the manuka flower, with the remainder deriving from “other floral sources.” Plaintiffs claimed Trader Joe’s mixed manuka honey with non-manuka honey, and in doing so violated “consumer protection and similar laws in all fifty states” – which allegedly incorporate the adulteration and misbranding provisions of the Federal Food, Drug, and Cosmetic Act (the “FDCA”) – and committed common-law fraud and breach of warranty.

In her opinion, Magistrate Judge Kandis A. Westmore cut straight to the point and rejected Plaintiffs’ argument that the honey was adulterated. Citing hearing testimony, she noted that Plaintiffs’ adulteration allegation was premised on “bees visiting different floral sources and returning to the hive resulting in a lower manuka pollen count, rather than the manufacturer purposefully mixing Manuka honey with non-manuka honey.” Under Section 342(b) of the FDCA, a product is adulterated only:

(1) If any valuable constituent has been in whole or in part omitted or abstracted therefrom; or (2) if any substance has been substituted wholly or in part therefor; or (3) if damage or inferiority has been concealed in any manner; or (4) if any substance has been added thereto or mixed or packed therewith so as to increase its bulk or weight, or reduce its quality or strength, or make it appear better or of greater value than it is.

None of those definitions was met in this case, Judge Westmore held, because any impurities in the honey were introduced by the bees that made it, and not by Trader Joe’s. She therefore granted Trader Joe’s motion to dismiss without leave to amend as plaintiffs “could not plead sufficient facts to support their adulteration theory.” Judge Westmore also ruled that to the extent the applicable state laws imposed different standards than the FDCA, they were preempted.

Along similar lines, Judge Westmore found that the product’s label was not misleading. According to FDA guidance, honey is a “single ingredient food” that may be labeled with the plant or blossom name so long as that plant or blossom is the “chief floral source.” Trader Joe’s argued that “100%” in the phrase “New Zealand Manuka Honey” could refer to either manuka honey or the fact that the honey comes entirely from New Zealand. Because Plaintiffs’ adulteration theory failed and the “chief floral source [was] undisputedly Manuka,” Judge Westmore held that the label was accurate and that a reasonable person would not be misled. She dismissed Plaintiffs’ common law fraud and breach of express warranty causes of action on similar grounds.

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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.

En Banc Ninth Circuit Reinstates and Clarifies Standard for Nationwide Class Action Settlement

Last month, the Ninth Circuit sitting en banc affirmed, by an 8–3 vote, a nationwide class settlement of a multidistrict litigation against automakers Kia and Hyundai over alleged misrepresentations regarding certain vehicles’ fuel efficiency. In re Hyundai and Kia Fuel Economy Litigation, 15-56014 (9th Cir. 2019). The en banc decision overturned the controversial decision last year by a split Ninth Circuit panel invalidating the settlement based on potential variations in state consumer protection laws. The panel decision cast serious doubt on the viability of nationwide settlements of class action suits filed within the Ninth Circuit.

This lawsuit was first filed in 2012 in the Central District of California, and subsequently was consolidated with a number of similar complaints into a single multidistrict litigation. In 2013, the parties reached a class-wide settlement agreement, and the district court certified for settlement purposes a nationwide class of all current owners and lessees who bought or leased the vehicles in question before the defendants announced downward adjustments of fuel efficiency estimates. The district court then granted final approval of the class settlement, which included an award of attorneys’ fees to class counsel. A number of objectors appealed the settlement class certification decision to the Ninth Circuit and, in 2018, a divided three-judge panel vacated the certification of a nationwide class and remanded to the district court.

The three-judge panel’s 2018 opinion held that in certifying a nationwide settlement class, the district court was required to analyze all applicable state laws to determine whether variations in the 50 state laws defeated predominance. In short, the panel required that the parties establish the predominance element in the same way as a plaintiff would need to do to certify a nationwide litigation class in a contested class certification motion. Because the district court did not conduct such an inquiry for the settlement class here, the panel concluded that the certification decision was in error. The Ninth Circuit’s 2018 opinion caused widespread consternation among counsel for both class action plaintiffs and defendants, because it raised the prospect that any certification of a nationwide settlement class in a case pending within the Ninth Circuit would have to be preceded by a burdensome and expensive analysis of variations in state law, threatening the viability of nationwide class action settlements in the Ninth Circuit.

In reversing the panel decision, the en banc court noted that no objectors had met their burden of establishing that the law of any state other than California applied. Moreover, and more importantly, the en banc court held that a district court need not conduct the same rigorous analysis of trial manageability when certifying a settlement class, noting that “a class that is certifiable for settlement may not be certifiable for litigation if the settlement obviates the need to litigate individualized issues that would make a trial unmanageable.” As a result, differences in available rights and remedies under the various laws of the 50 states no longer warrant denial of certification for settlement purposes in federal courts in California (where more class actions are brought than in any other state) or in the other states of the Ninth Circuit.

The In re Hyundai and Kia en banc decision provides an important clarification of the standards for certification of settlement classes as compared to litigation classes, and revives the viability of nationwide class settlements in the Ninth Circuit. The en banc court’s decision also brings the Ninth Circuit in line with the Third and Seventh Circuits, which both have held that variations in the laws of different states do not defeat predominance in the context of a settlement class. 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.

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