Proskauer on Advertising Law
Proskauer on Advertising Law

Cheez-Its Class Action Revived in “Whole” by Second Circuit

We recently blogged about the Second Circuit’s December 3, 2018 decision in Jessani v. Monini, where, applying the reasonable consumer standard, the Court of Appeals unanimously affirmed the dismissal with prejudice of a complaint alleging that the label of an extra virgin olive oil product advertised as “truffle flavored” falsely implied that the product contained real truffles. Just over a week later, on December 11, another Second Circuit panel decided an appeal which, like Monini, involved the application of the reasonable consumer standard to a food product label. But this time, the Court vacated the lower court’s dismissal of the complaint. Mantikas v. Kellogg Company, — F.3d — (2d Cir. Dec. 11, 2018). Mantikas did not cite to Monini, and the cases are readily distinguishable.

Plaintiffs in the Kellogg case, on behalf of a purported class of purchasers of whole grain-flavored Cheez-Its, alleged that the product’s labelling falsely suggested that its grain content was predominantly whole grain, when in fact it was mostly enriched flour. In support of this allegation, plaintiffs pointed to the prominent words “WHOLE GRAIN” and “MADE WITH WHOLE GRAIN” on the two versions of the product label that were challenged. The district court dismissed the complaint as a matter of law, holding that the claim that the product contained whole grain was true, and no reasonable consumer would think the product’s grain content was primarily whole grain because the label disclosed the exact amount of whole grain that was in the product, as well as the amounts of the product’s other ingredients.

The Second Circuit disagreed, holding that plaintiffs had plausibly alleged that the Cheez-Its label was capable of deceiving a reasonable consumer. The conspicuous words “WHOLE GRAIN” and “MADE WITH WHOLE GRAIN” could plausibly communicate to a reasonable consumer that the product’s grain content was entirely or at least predominantly whole grain. While the front label set forth the precise amount of whole grain in the product (5 or 8 grams depending on the version of the product), it did not make clear that the product contained more enriched flour than whole grain.

Further, despite acknowledging the principle that a challenged advertisement must be considered “as a whole, including disclaimers and qualifying language,” the Second Circuit found that the ingredient list on the product’s side panel did not cure the front label’s potentially deceptive content. First, Kellogg was not helped by the side panel’s specification that a serving consisted of 29 grams because that disclosure failed to indicate the ratio of whole grain to enriched flour. Second, Kellogg argued that because enriched flour was listed as the first (and thus most predominant) ingredient on the ingredient list, whereas whole grain listed as the second or third ingredient, this would indicate to a reasonable consumer that the primary grain was enriched flour. However, the Court held that a reasonable consumer should not be expected to consult an ingredient list to correct a contradictory statement on the front label.

It is that last point that distinguishes Kellogg from Monini. Readers may recall that in Monini, one factor in the Second Circuit’s decision was that truffles were not listed as an ingredient. Kellogg does not hold that courts must disregard the ingredient list when analyzing the reasonable takeaway from a food label; as noted, the Court expressly recognized the longstanding principle that an advertisement must be considered as a whole. Rather, Kellogg reflects the principle (previously recognized by the Ninth Circuit in Williams v. Gerber) that an ingredient list may not be used to contradict a claim that is clearly made on the front label. In Monini, by contrast, there was no claim that the product was “made with truffles” or “flavored by truffles,” so the absence of truffles on the ingredient list was consistent with the front label and thus was appropriately considered when construing the label.

In sum, Kellogg holds that reasonable consumers are free to rely on a front label claim that is clearly expressed, and are not expected to consult a contradictory ingredient list to decipher that the front label’s message is untrue. Thus, food product sellers should carefully assess what messages their labelling conveys and should not assume that a product’s ingredient list will cure any deceptive messages communicated by the front label about the product’s composition.

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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.

$15 Million False Ad Verdict Boosts Damages In Probiotic IP Dispute

On November 20, 2018, a years-long dispute before Judge Theodore Chuang in the District of Maryland over probiotics culminated in a gut-wrenching $18 million jury verdict against defendant pharmaceutical companies.  The case is De Simone v. VSL Pharmaceuticals, Inc. et al., No. 8:15-cv-01356.

The dispute involved numerous claims and counterclaims, including both a claim and a counterclaim for false advertising under the Lanham Act. While the advertising-related issues appeared initially to be only a small part of the case, overshadowed by the 50-plus other claims and counterclaims asserted by the various parties, plaintiff’s false advertising claim ultimately proved the most lucrative part of the case, making up a hearty $15 million of the $18 million verdict.

The lawsuit was initiated by Claudio De Simone, the inventor of the probiotic formula at issue, and ExeGi Pharma, the company currently licensed to sell De Simone’s probiotics. In 2000, De Simone co-founded VSL Pharmaceuticals, which entered into a joint venture with Alfasigma USA and Leadiant Biosciences  to sell De Simone’s probiotic formula under the name VSL#3. De Simone later left VSL, ended the joint venture, and began selling his probiotic formula with ExeGi under a new name, Visbiome. De Simone and ExeGi advertised Visbiome as the only probiotic on the market that contains De Simone’s original probiotic formula. Meanwhile, defendants Alfasigma and Leadiant continued to sell a probiotic formula under the VSL#3 name, and advertised that product as being exactly the same as De Simone’s original probiotic formula. De Simone and ExeGi subsequently filed this lawsuit, asserting a variety of claims, including breach of license agreement, unjust enrichment, and false advertising under the Lanham Act. Defendants responded with over fifty counterclaims, including with their own Lanham Act false advertising claim.

At the heart of both sides’ false advertising claims was the question of whether defendants’ current formula for VSL#3 was clinically equivalent to Visbiome and to De Simone’s original formula of VSL#3 sold during the joint venture. Defendants argued it was. Therefore, they alleged that De Simone and ExeGi engaged in false advertising by marketing Visbiome as the only brand that contains the original De Simone probiotic formula. On the flip side, De Simone and ExeGi argued that defendants’ current VSL#3 product was different from Visbiome and from De Simone’s original probiotic formula, and that Alfasigma and Leadient therefore engaged in false advertising in marketing their new version of VSL#3 as being exactly the same as De Simone’s original probiotic formula. Specifically, De Simone argued that defendants’ new version was made with cheaper, untested ingredients, and was therefore less effective.

The jury ultimately sided with De Simone and ExeGi, finding that the defendants’ new VSL#3 product differed from De Simone’s original probiotic formula, and that Alfasigma and Leadient engaged in false advertising in marketing their new product as identical to De Simone’s formula sold during the time of the joint venture. The jury also found defendants liable for breach of contract and unjust enrichment, but it was the $15 million it awarded for the Lanham Act false advertising claim that truly made this judgment a bitter pill for defendants to swallow . Briefing concerning damages calculations under the Lanham Act were filed under seal, so it is not entirely apparent how the jury arrived at this $15 million figure, particularly for a claim that did not initially seem to be a focal point of the case.  However, certain trial briefings and jury instructions suggest that Plaintiffs sought to disgorge Defendants’ profits that were attributable to Defendants’ false advertising of the VSL#3 product. In addition, Defendants’ motion for a new trial filed on December 19, 2018 argues that an inflamed jury improperly inflated the false advertising damages as “quasi-punitive damages” based on Plaintiffs’ counsel’s improper argument on the safety of VSL#3, which was not at issue in the case.

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.

Eleventh Circuit Works Out Preclusion and Preemption Issues in Protein Powder Dispute

On December 4, 2018, the Eleventh Circuit partially reversed the dismissal of Hi-Tech Pharmaceuticals’ suit against HBS International Corp. for alleged violations of the Lanham Act and Georgia’s Uniform Deceptive Trade Practices Act. Hi-Tech Pharmaceuticals, Inc. v. HBS International Corp., No. 17-13884 (11th Cir. 2018).

Hi-Tech alleged that the label of HBS’s protein-powder supplement – its “Ultra-Premium 6-Protein Blend HexaPro” mix – misled customers about the quality and quantity of protein in each serving. The product’s labeling indicated that each serving contained 25 grams of protein and highlighted its “6 Ultra-High Quality Proteins.” Hi-Tech claimed this was misleading because each serving contained only 17.9 grams of these ultra-high quality and molecularly complete proteins, with the rest of the protein content consisting of free-form amino acids or other non-protein ingredients.

The district court granted HBS’s motion to dismiss the Lanham Act claim on the ground that no reasonable consumer would be misled by the product’s label because it provided a detailed breakdown of all HexaPro’s ingredients, including the mix of amino acids.  It also dismissed the state law claim, finding it was preempted by the FDCA.

On appeal, the Eleventh Circuit reversed the district court’s dismissal of Hi-Tech’s Lanham Act claim under the reasonable consumer standard. It held that, considering the “total impression” of the labels as a whole,  Hi-Tech had plausibly alleged that a reasonable consumer could be misled to believe that all 25 grams of the protein in each serving come from the “Ultra-Premium 6-Protein Blend,” as opposed to from other additives such as free-form amino acids.

The Eleventh Circuit then went on to consider an issue the district court did not reach: whether the Lanham Act claim was precluded by the FDCA.  Citing to POM Wonderful v. Coca-Cola, the Eleventh Circuit rejected HBS’s preclusion argument and found that it could simultaneously comply with both the FDCA’s requirements and the Lanham Act by clarifying on the HexaPro label how much of the 25 grams of protein in each serving came from the six-protein blend and how much came from other ingredients.

However, the Eleventh Circuit did affirm the district court’s finding that Hi-Tech’s state law claim against HBS were preempted by the FDCA. Federal regulations allow protein content to be calculated “on the basis of the factor 6.25 times the nitrogen content of the food.” 21 C.F.R. § 101.9(c)(7). Hi-Tech did not dispute that HBS’s labeling complied with that standard; rather it alleged that the labeling misled consumers as to the nature, source, and quality of the protein. Because the state law claim was inconsistent with the FDCA’s requirements, the claim was preempted and correctly 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.

Second Circuit Affirms Dismissal of Truffle Kerfuffle

Last year, we wrote about Jessani et al v. Monini North America, a case in the Southern District of New York in which the court dismissed as a matter of law plaintiffs’ complaint alleging that Monini falsely advertised its “White Truffle Flavored Extra Virgin Olive Oil” product as containing actual white truffle. The case turned on a reasonable consumer’s takeaway from the product label, which represented that the product was “white truffle flavored” and depicted a sliced white truffle on the front label, but nowhere stated that it contained white truffle. Notably, truffles were not listed on the ingredient list.

Proskauer’s Larry Weinstein and Jeff Warshafsky represented Monini before both the Southern District of New York and the Second Circuit. Jeff argued the Second Circuit appeal on October 22, 2018. This past Monday, the Second Circuit panel unanimously affirmed the lower court’s ruling in favor Monini. Jessani et al v. Monini North America, 2018 WL 6287994, (2d Cir. Dec. 3, 2018).

The Second Circuit squarely rejected plaintiffs’ contention that whether a reasonable consumer is likely to be misled by a product label is not appropriate for resolution on a motion to dismiss. The Court held that courts can in appropriate circumstances determine as a matter of law that an advertisement would not mislead reasonable consumers, and agreed with the District Court that reasonable consumers would not have been misled by Monini’s label because the label merely represented that the product is “white truffle flavored” and truffles are not listed on the ingredient list.

Critical to the decision was plaintiffs’ concession that white truffles are “the most expensive food in the world” and are highly perishable, combined with the undisputed fact that defendant’s product was modestly priced and mass produced:

In this context, representations that otherwise might be ambiguous and misleading are not: it is simply not plausible that a significant portion of the general consuming public acting reasonably would conclude that Monini’s mass produced, modestly-priced olive oil was made with “the most expensive food in the world.”

Id. at *1 (internal citation and footnotes omitted).

The Second Circuit’s decision affirms that manufacturers are free to identify their product’s characterizing flavor – and even may depict it visually as Monini did with a large image of a sliced white truffle on the front label – provided that the label is clear, when viewed in context, as to what ingredients are contained in the product.

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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 Affirms Jury Verdict In Favor of Homeopathic Remedy for Flu-Like Symptoms

On November 8, 2018, the Ninth Circuit affirmed a jury verdict in a consumer class action deceptive advertising case in favor of Defendants Boiron Inc. and Boiron USA, Inc. (together, “Boiron”), the sellers of a homeopathic treatment for flu-like symptoms called Oscillococcinum (“Oscillo”).  Although the Ninth Circuit’s memorandum decision is marked “Not for Publication” and therefore is non-precedential under Ninth Circuit rules, the decision is still worth noting, as jury verdicts in class action false advertising cases are rare. Continue Reading

District Court Filters Out Preempted “Spring Water” False Advertising Claim

Earlier this year, we covered a decision from the District of Connecticut finding state law false advertising claims against the bottled water company Poland Spring preempted by the FDCA. Flowing from that decision is the case we are covering today: Frompovicz v. Niagara Bottling, LLC, 2018 WL 4465879 (E.D. Pa. Sept. 18, 2018). Continue Reading

EDNY Sticks a Fork in Angus Steak Sandwich Class Action Complaint

A federal court in the Eastern District of New York recently dismissed a putative class action filed against Dunkin’ Brands alleging deceptive advertising with respect to its Angus Steak & Egg Breakfast Sandwich and Angus Steak & Egg Wake-Up Wrap. Judge Carolyn Amon dismissed the claims by out-of-state plaintiffs on jurisdictional grounds, and found the challenged product names were not misleading as a matter of law. The case clarified the standard that class-action plaintiffs must meet for the court to find specific personal jurisdiction, and demonstrated yet another court’s willingness to rule as a matter of law on whether advertising is misleading to a reasonable consumer. Continue Reading

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