What’s in a Word? The Legal Battle over “Natural” in False Advertising

While class actions centered around “natural” claims remain popular with the plaintiffs’ bar, this past year has seen some growing skepticism from courts towards such lawsuits, particularly where plaintiffs fail to adequately explain what is deceptive about the term.

In January, Judge Kimba M. Wood of the Southern District of New York granted summary judgment to Colgate-Palmolive and its subsidiary Tom’s of Maine in a putative class action challenging the use of the term “natural” on Tom’s toothpaste and deodorant products. De Lacour v. Colgate-Palmolive Co., No.16-cv-8364 (S.D.N.Y. Jan. 3, 2024). The Court found that the plaintiff’s evidence was insufficient to demonstrate that a reasonable consumer would understand “natural” to convey that the challenged products do not contain synthetic and/or highly chemically processed ingredients. The Court dismissed the plaintiff’s surveys as “fatally flawed” because they defined “natural” and “artificial” only in relation to each other (i.e., “natural” as meaning “not artificial”, and “artificial” as meaning “not natural”) and failed to provide respondents with adequate definitions of those otherwise ambiguous terms. Additionally, when asked what other things the word “natural” communicated, respondents gave responses as varied as “certified organic,” “earthy,” “[n]o animal testing, recyclable,” “[n]o aluminum,” and, “natural.” Looking at these surveys and other evidence in the record, including the fact that there is no governmental guidance regarding the use of “natural” labeling on personal care products, the Court found that the evidence demonstrated “that there are many interpretations of the word ‘natural,’” and the named plaintiff’s subjective interpretation of the term was insufficient to establish evidence of widespread consumer confusion.

Other cases have followed similar reasoning. For instance, in McGinity v. Proctor & Gamble, 69 F. 4th 1093 (9th Cir. 2023), consumers sued P&G, alleging that the “Nature Fusion” label on P&G’s Pantene Pro-V hair products misled consumers into believing the items were natural, despite containing synthetic ingredients. The district court dismissed the complaint, holding that a reasonable consumer would not be deceived by the label.

The Ninth Circuit affirmed the dismissal, emphasizing the ambiguity of the term “Nature Fusion.” The Court found that this ambiguity was resolved by reading the back label, which clarified that the products contain both natural and synthetic components, rendering the labeling of the product not deceptive as a matter of law.

Given the continued prevalence of lawsuits surrounding “natural” claims, companies should continue to exercise caution in assessing the messages conveyed by such claims in context. However, if courts continue to recognize the potential ambiguity in “natural” claims, as they have increasingly done over the past year, such claims may finally become a less popular target going forward, given their susceptibility to motions to dismiss and the difficulty of certifying a class.

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Reasonable Consumer Analysis Leads to Dismissal of Claims of Greenwashing

By Baldassare Vinti, Jeff Warshafsky and Jessica Griffith on June 13, 2024 Posted in Class Actions, Deceptive Trade Practices, Labeling Claims

Many brands have reformulated beloved products with “cleaner” ingredients, while others have curated a special selection of “clean” products to offer their customers. Advertisers’ efforts, however, can run into trouble if consumers reasonably believe the “clean” labeling does not match what is contained in the product. Sephora recently faced this issue in a purported class action challenging its “Clean at Sephora” seal. However, Judge David Hurd of the Northern District of New York dismissed the claims, finding the plaintiff had failed to adequately allege what exactly a reasonable consumer would find misleading about the seal. Finster v. Sephora USA, Inc., No. 22-cv-1187 (N.D.N.Y. Mar. 15, 2024).

Sephora, a cosmetic goods retailer, labels certain of its brands and products with the “Clean at Sephora” seal if they meet certain criteria set by Sephora. According to information on Sephora’s website, the “Clean at Sephora” seal signifies that a product complies with certain requirements focused on transparency in formulation and sourcing, as well as the avoidance of certain ingredients. For example, all “Clean at Sephora” products are formulated without parabens, sulfates, SLS and SLES, phthalates, mineral oil, formaldehyde, and other undesirable ingredients.

In Finster, the plaintiff claimed she bought certain products from Sephora in reliance on the “Clean at Sephora” seal believing that the products were “clean.” However, plaintiff claimed that Sephora’s representation mislead her because, contrary to her understanding, some “Clean at Sephora” products nonetheless contain alleged synthetic and harmful ingredients. In support of this allegation, plaintiff cited a laundry list of synthetic ingredients found in “Clean at Sephora” cosmetics she alleged were known to cause irritation or other human harm.

Judge Hurd disagreed, finding that plaintiff had failed to allege that a reasonable consumer would understand the “Clean at Sephora” label to mean that the products contained no synthetic or harmful ingredients whatsoever. The Court noted that none of the “Clean at Sephora” marketing materials cited by the plaintiff made any representation that those products were free of all synthetic or harmful ingredients—indeed, the advertising cited by the plaintiff explicitly said that products bearing the “Clean at Sephora” seal were formulated without specific ingredients known to be harmful to human health or the environment. Further, the Court found that the plaintiff had not alleged the purported harmful ingredients she claimed were in “Clean at Sephora” products were among those Sephora said were excluded. As such, the plaintiff had failed to allege Sephora materially misled consumers by selling “Clean at Sephora” products.

This case serves as a reminder to carefully scrutinize claims of consumer deception which rely on interpretations of advertising that run counter to definitions provided by marketers. Courts will dismiss claims of consumer deception where a plaintiff relies solely on his or her unreasonable understanding of a challenged term.

Summer Associate, Gabriella Lee, assisted with writing this post.

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Nothing Fishy About Whole Foods’ Fish Oil Supplement Product Label

By Baldassare Vinti, Jessica Griffith and Marielle T. LaBerge on June 12, 2024 Posted in Class Actions, Deceptive Trade Practices, Labeling Claims

In line with prior precedent, the Second Circuit recently affirmed that the product label for Whole Foods’ fish oil softgel product did not deceptively misstate the quantity of Omega-3s it contained. Foster v. Whole Foods Market Group, Inc., No. 23-285-cv (2d Cir. Dec. 8, 2023). The Court found that because the front label was merely ambiguous, rather than misleading, the challenged claim was not deceptive because reference to the back label would quickly dispel the plaintiff’s alleged confusion.

In Foster, the plaintiff alleged she was deceived into believing Whole Foods’ fish oil softgel product contained 1000mg of Omega-3s based on the close proximity of the statement “Omega-3s EPA & DHA” above the statement “1000mg Per Serving” on the front label. However, the back label revealed that the product actually contained 1000mg of fish oil, and just 300mg of Omega-3s. In affirming dismissal, the Court noted the product’s front label included four subsidiary statements: (1) “Omega-3s EPA & DHA;” (2) “1000mg Per Serving;” (3) “From Small Cold-Water Fish;” and (4) “Molecularly Distilled.” The Court acknowledged that while these statements were all in close proximity, the plaintiff had failed to adequately allege that a reasonable consumer would read “1000 mg Per Serving” only in conjunction with the first line referencing Omega-3s, rather than reading each of the subsidiary lines to independently describe the principal label, “Fish Oil.” As such, the Court found the plaintiff did not adequately allege a reasonable consumer would be misled.

The Court distinguished this case from its prior holding in Mantikas v. Kellogg Co., 910 F.3d 633 (2d Cir. 2018), which had reversed the dismissal of a false advertising case at the pleading stage. In Mantikas, the Second Circuit held that clarifying information on the back label cannot not overcome “clearly inaccurate” factual representations on the front label. Here, the Court found Mantikas did not apply because the product label did not include an “affirmatively inaccurate” statement. Rather, because the challenged claim was at most ambiguous, the additional language on the back label of the product could be considered to clarify any arguable ambiguity on the front.

The ruling in Foster confirms that where a challenged label claim is merely ambiguous, rather than misleading, a product’s front and back labels may both be used to inform consumers regarding the qualities of that product. This is in line with precedent in other Circuits, including recent decisions from the Ninth Circuit.

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Tags: Food and Beverages, Labeling, Marketing, Second Circuit

Second Circuit Serves Up a Win for Subway in TCPA Case

By Jeff Warshafsky on May 14, 2024 Posted in Class Actions, Deceptive Trade Practices

While there might not be such a thing as a free lunch, Subway in 2016 texted a consumer that she could receive a free bag of chips with any purchase. The text let the consumer know she could respond STOP to opt out of the texts, which she did. Despite Subway responding that the consumer had been unsubscribed, several days later Subway texted the consumer again with a link to another promotional offer. The consumer sued on behalf of a putative class for alleged violations of the federal Telephone Consumer Protection Act. The district court dismissed the complaint and, last week, the Second Circuit affirmed the dismissal. Soliman v. Subway Franchisee Advertising Fund Trust, LTD., No. 22-1726 (2d Cir. May 10, 2024).

The TCPA makes it unlawful “to make any call (other than a call made for emergency purposes or made with the prior express consent of the called party) using any automatic telephone dialing system or an artificial or prerecorded voice . . . to any telephone number assigned to a . . . cellular telephone service.” 47 U.S.C. § 227 (b)(1)(A)(iii) (emphases added). But as both the district court and now the Second Circuit found, the putative class action complaint failed to plausibly allege that Subway sent the text messages either (1) using an automatic telephone dialing system (“ATDS”), or (2) using an artificial or prerecorded voice, so the text messages did not fall within the TCPA’s ambit.

On the first point, it was undisputed that Subway did not randomly generate telephone numbers. Instead, it stored a pre-existing list of telephone numbers that were then texted based on randomly generated indexing or coding numbers. In other words, the list of telephone numbers was not randomly generated; it was the selection of which stored telephone numbers to text that was random.

The plaintiff argued that the TCPA’s definition of an ATDS includes numbers randomly drawn from a pre-existing list of numbers, but the Second Circuit disagreed. The TCPA provides that an “automatic telephone dialing system . . . has the capacity . . . (A) to store or produce telephone numbers to be called, using a random or sequential number generator; and (B) to dial such numbers.” 47 U.S.C. § 227(a)(1). The Second Circuit easily concluded that the first and third references to “numbers” in this section clearly referred to telephone numbers. While it was less obvious what “number generator” referred to, the Court found that “it would be incongruous for ‘numbers’ to refer to telephone numbers in the first and third mention in the statute, but not the second.” This interpretation also was consistent with the TCPA as a whole, which uses “number” and “telephone number” interchangeably in other sections. Accordingly, Subway’s use of a random number generator to dial pre-stored numbers did not meet the TCPA’s definition of an ATDS.

On the second point, the district court held that a text message is not an artificial or prerecorded “voice,” and the Second Circuit affirmed this holding on appeal too. When the TCPA was enacted, voice was defined as a “sound produced by vertebrates by means of lungs, larynx or syrinx, and various buccal structures.” Further, the TCPA itself reflected that “voice” meant something audible because the statute defines “caller identification information” as information “regarding the telephone number of, or other information regarding the origination of, a call made using a voice service or a text message sent using a text messaging service.” 47 U.S.C. § 227(e)(8)(A) (emphasis added).

Under Soliman, technologies like Subway’s are not subject to the TCPA’s provisions relating to the use of an ATDS or artificial or prerecorded voice. This is a significant victory for companies facing TCPA suits, particularly in the Second Circuit.

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Tags: Class Action, Marketing, Second Circuit, TCPA

Courts Neutralize Baseless Acid Lawsuits

By Jeff Warshafsky on May 7, 2024 Posted in Class Actions, Deceptive Trade Practices, Labeling Claims

Over the last few years, hundreds of lawsuits have been filed, and many more threatened, involving advertising claims that a product has no artificial preservatives or flavors. In many cases, the plaintiffs allege such advertising claims are false because the products contain citric acid, malic acid, or other organic acids and natural ingredients.

Plaintiffs in these cases typically allege that these ingredients are produced synthetically, but often fail to plead any factual basis for this assertion. This “shoot first ask questions later” approach is improper. See Fed. R. Civ. P. 11. It also violates the federal pleading standards, as two recent decisions recognized. See Valencia v. Snapple Beverage Corp., 2024 WL 1158476 (S.D.N.Y. Mar. 18, 2024); Trammell v. KLN Enters., 2024 WL 1722243 (S.D. Cal. Apr. 22, 2024).

In Valencia, Judge Cathy Seibel of the Southern District of New York considered whether the plaintiff plausibly alleged that Snapple’s “All Natural” claims on certain products were plausibly deceptive given the product contains citric acid. According to the plaintiff, while citric acid can be derived naturally from citrus fruit, “for over a hundred years, none of the production of citric acid has been natural because it is made beginning with fermentation from the Aspergillus niger mold” and “recovered through numerous chemical reactions with mineral salts and reagents” – a process that the plaintiff alleges renders citric acid “an industrially produced, synthetic ingredient.”

These allegations failed on two fronts. First, the court found that plaintiff’s generalized assertions that citric acid is industrially produced was insufficient to plausibly allege that the citric acid in Snapple’s products is synthetic. As the court explained, “Plaintiff’s bare claim here that citric acid today is made from mold rather than citrus fruit cannot, absent any allegation specific to the Products and absent any basis for her assertion about all citric acid, be sufficient.”

Second, the court found that even if the plaintiff had plausibly alleged that Snapple’s citric acid came from fermentation of Aspergillus niger mold, as opposed to citrus fruit, the complaint did not explain why it would be deceptive to describe such citric acid as natural. Plaintiff did “not allege that the resulting citric acid contains synthetic agents.” Further, “[a] reasonable consumer would not think that a compound found in nature is artificial even if it is produced in a different way than nature produces it, if the way it is produced is that it is derived from a natural product and does not contain anything synthetic.” Accordingly, the court granted Snapple’s motion to dismiss in full.

In Trammell, Judge Marilyn Huff of the Southern District of California reached a similar conclusion about alleged malic acid in Wiley Wallaby Very Berry Licorice. The plaintiff allegedly relied on claims that the products are “Naturally Flavored” and “Free of . . . Artificial Colors & Flavors,” when in fact the products purportedly contain malic acid that allegedly is “derived from petrochemicals.” The court observed that malic acid was listed on the product’s ingredient list, but the label did not say whether the malic acid is natural or artificial or whether it functions as a flavor. It was therefore up to the plaintiff to plausibly allege such facts.

The court agreed with the defendant that plaintiff failed to do so and dismissed the complaint in full. “Plaintiff’s conclusory allegations, without more particularity, are a far cry from raising any factually substantiated allegations that Wiley Wallaby Very Berry Licorice contains artificial malic acid, rather than natural malic acid, and that the malic acid functions as a flavor.”

These cases are a reminder to the plaintiffs’ bar that the time to investigate purported false advertising claims is before suing. Courts should dismiss pleadings that simply assume ingredients are synthetic even though they exist naturally. If a consumer believes otherwise, it is their burden to plead a factual basis for so alleging, and it is their counsel’s ethical obligation only to file complaints or serve demands that are predicated on such facts. Companies who are faced with such spurious allegations should insist that plaintiffs and their counsel comply with these rules and obligations.

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Tags: Class Action, Deceptive Trade Practices, Food and Beverages, Labeling, Marketing, Natural Claims

FTC Appears to Expand AI Regulatory Role into Copyright Matters

By Nolan Goldberg and Michelle M. Ovanesian on November 20, 2023 Posted in Events and Announcements, NAD/NARB/CARU/ERSP

In a recent public comment addressed to the United States Copyright Office, the Federal Trade Commission seemingly expanded upon remarks made at the National Advertising Division back in September that it will aggressively and proactively challenge alleged unfair practices involving artificial intelligence, even if that means stretching the meaning of “unfair” to increase its jurisdiction over such matters.

Read the full post on Proskauer’s Minding Your Business blog.

Tags: Age of AI, AI Regulation, AI technology, algorithmic accountability act of 2023, Big Tech, competition law, Federal Trade Commission (FTC), Generative AI, National Advertising Division (NAD), Privacy Law, technology

That’s a “Wrap”: Second Circuit Upholds Click-Wrap Mandatory Arbitration Provision

By Baldassare Vinti, Jeff Warshafsky, Jennifer Yang, Anisha Shenai-Khatkhate and Jana R. Ruthberg on November 6, 2023 Posted in Arbitration Clause, Class Actions

This past Friday, the Second Circuit reversed a lower court’s denial of a motion to compel arbitration in a putative consumer class action against fintech company Klarna. Edmundson v. Klarna, Inc., Case No. 22-557-cv (2d Cir. Nov. 3, 2023). The panel upheld the enforceability of Klarna’s “click-wrap” mandatory arbitration provision incorporated in Klarna’s terms and conditions. This precedential decision comes amid a surge in putative class actions targeting online services including, for example, subscription programs subject to state auto-renewal laws. For companies that have arbitration clauses in their website user agreements, Edmundson is another tool in the kit to help deter and defeat class actions.

The enforceability of an arbitration clause is a question of contract law and turns on whether the parties assented to the contractual terms. Plaintiffs in these types of cases involving online clickwrap provisions—where consumers accept terms by clicking a button or checking a box—often argue a lack of mutual assent on the basis that the terms of service containing the arbitration clause were allegedly not clearly visible. But the Second Circuit maintains that even absent evidence that a consumer had actual knowledge of the clickwrap terms, the consumer will be bound if (1) notice of the terms was displayed conspicuously enough such that a reasonably prudent person would be on inquiry notice of the terms, and (2) the consumer unambiguously manifests assent through conduct that a reasonable person would understand to constitute assent.

Klarna is a web service that offers shoppers the option to “buy now, pay later.” Plaintiff filed a putative class action alleging that Klarna misrepresented and concealed the risk of facing bank overdraft fees when using that service. When signing up for Klarna’s service, consumers are asked to assent to Klarna’s terms of service, which include a mandatory arbitration clause. Klarna moved to arbitrate plaintiff’s claims, alleging that plaintiff agreed to Klarna’s terms of service at various different points, including when she used a Klarna checkout “Widget” to finalize an online purchase. The district court denied Klarna’s motion to arbitrate, finding that plaintiff did not have reasonably conspicuous notice of and did not unambiguously manifest assent to Klarna’s terms of service, and therefore plaintiff was not bound by the mandatory arbitration clause in those service terms. The Second Circuit reversed and upheld the enforceability of Klarna’s arbitration clause.

First, the panel found the Klarna Widget provided reasonably conspicuous notice of Klarna’s terms of service (and thus the arbitration clause contained therein), sufficient to provide inquiry notice. The Court emphasized that the Widget interface, shown below, is “uncluttered,” the only link it provides is to Klarna’s terms of service, and the consumer is presented with only one button to click: “Confirm and continue.”

The Court noted that this content was all “visible at once,” without needing to scroll down to find notice of Klarna’s payment terms, and since the hyperlink appears directly above the “Confirm and continue” button, a reasonable internet user “could not avoid noticing the hyperlink to Klarna’s terms when the user selects ‘Confirm and continue’ on the Klarna Widget.” The Court further noted that the hyperlink to the terms is set apart from the surrounding information by being underlined and in a color that stands in sharp contrast to the background.

Second, the Court found that plaintiff unambiguously manifested assent to the terms of service by clicking the Widget button to “Confirm and continue.” Specifically, the Court found that reasonable internet users would understand that clicking that button constitutes confirmation that they “agree to the payment terms” as stated conspicuously directly above the button. Conversely, it would be unreasonable for an internet user to see the clear and conspicuous statement, “I agree to the payment terms,” with the button marked “Confirm and continue” directly under it, and not understand that the button is the mechanism by which the user confirms his or her agreement to the linked terms. The Court also pointed to the fact that plaintiff “could not have reasonably believed that the information set forth on the Klarna Widget above the hyperlinked ‘payment terms’ represented all the terms governing her use of Klarna’s service,” and therefore was on inquiry notice that her “agree[ment] to the payment terms” necessarily encompassed more, “and the burden was then on her to find out to what terms she was accepting.” The Court thus held that plaintiff “unambiguously manifested her assent to Klarna’s terms” and, “as a matter of law, [plaintiff] agreed to arbitrate her claims against Klarna.”

The Second Circuit’s decision in Edmundson could not come at a better time for companies who provide online services, including those with auto-renewing subscription programs. Class actions targeting such services have been on the rise, with plaintiffs’ attorneys demanding unrealistic levels of conspicuousness for hyperlinked terms of service. This decision rejects the plaintiffs’ bar’s extreme position and confirms that the practices employed by many companies suffice to put reasonable consumers on notice that they are agreeing to terms of service—including arbitration clauses contained therein—by proceeding with a transaction. Of course, whether arbitration clauses are best for your business should be assessed with counsel, to weigh their benefits against the risk of mass arbitrations.

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Tags: Arbitration Clauses, Class Action, Online User Agreements, Second Circuit

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