False Advertising Consumer Class Actions: Best Practices and Latest Developments

Transcription

1 Presenting a live 90-minute webinar with interactive Q&A False Advertising Consumer Class Actions: Best Practices and Latest Developments Bringing or Defending Misleading Advertisement Litigation THURSDAY, NOVEMBER 19, pm Eastern 12pm Central 11am Mountain 10am Pacific Today s faculty features: Joshua A. Reiten, Partner, Perkins Coie, San Francisco Ali R. Rabbani, Winston & Strawn, Los Angeles The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions ed to registrants for additional information. If you have any questions, please contact Customer Service at ext. 10.

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5 Recent Trends and Developments in False Advertising Consumer Class Actions Joshua Reiten (415) Perkins Coie LLP

6 Overview 1. Handmade / Artfully Crafted Cases 2. Ascertainability & Class Certification 3. Preemption/Primary Jurisdiction 4. Corporate Responsibility Cases 5. Compare At Pricing Suits Perkins Coie LLP PerkinsCoie.com 6

7 Handmade / Artfully Crafted Cases New breed of class actions challenge claims about HOW the products are made Alcohol cases Bread cases Perkins Coie LLP PerkinsCoie.com 7

8 Handmade / Artfully Crafted Alcohol Cases Recent labeling cases and challenged terms Craft ; Artfully Crafted ; trade name Parent v. MillerCoors (N.D. Cal.) Handmade ; Handcrafted Salters v. Beam Suntory (S.D. Fla.) Welk v. Beam Suntory (S.D. Cal.) Nowrouzi v. Maker s Mark (S.D. Cal.) Handmade ; made in an old fashioned still Pye v. Fifth Generation, Inc. (N.D. Fla.) Hofman v. Fifth Generation, Inc. (S.D. Cal.) Light Cruz v. Anheuser-Busch, LLC (C.D. Cal.) 8 Perkins Coie LLP PerkinsCoie.com 8

9 Handmade / Artfully Crafted Bread Cases Store baked ; Made in house Mladenov v. Wegman s (D.N.J.) Mladenov v. Whole Foods (D.N.J.) Mao v. Acme Markets (D.N.J.) District Court struck the class allegations and dismissed the claims under Rule 12(b)6) Mladenov v. Wegmans Food Markets, Inc., 2015 WL , at *16, -- F. Supp. 3d -- (D.N.J. Aug. 26, 2015) Perkins Coie LLP PerkinsCoie.com 9

10 Ascertainability & Class Certification Heightened ascertainability standard post-carrera? Solid in the Third Circuit (Carrera, Byrd) Eleventh Circuit has adopted (Karhu) Fourth Circuit appears to follow (EQT) Rejected by Sixth & Seventh Circuits Rikos (6 th Cir.) Mullins (7 th Cir.) Ninth Circuit currently split Some N.D. cases approve (Perrine, Clorox) Others reject (McCrary, Morales, Rahman) Ninth Circuit poised to resolve in Jones v. ConAgra Perkins Coie LLP PerkinsCoie.com 10

11 Ascertainability & Class Certification Ascertainability strategies Retailer subpoenas Loyalty card data Discoverability / Privacy issues Sufficient to certify? Under-inclusiveness? Narrowed classes Perkins Coie LLP PerkinsCoie.com 11

12 Preemption & Primary Jurisdiction Federal Preemption Limited application post-pom Wonderful Ninth Circuit rejections Reid (9 th Cir. 2015) - No Trans Fat claim subject to state law claims Astiana (9 th Cir. 2015) - all natural not a protected phrase under FDCA Recent lower court decisions follow Saeidain (C.D. Cal. 2015) fruit juice content Perkins Coie LLP PerkinsCoie.com 12

13 Preemption & Primary Jurisdiction Federal Preemption Some successes for defendants Gisvold v. Merck (S.D. Cal. 2014) dismissing sunscreen labeling claims on preemption and primary jurisdiction grounds Bimont v. Unilever (S.D.N.Y. 2014) slack fill claims preempted as to cosmetics/otc drugs Gallagher v. Bayer (N.D. Cal. 2015) vitamin label claims preempted by FDCA and DSHEA Perkins Coie LLP PerkinsCoie.com 13

14 Preemption & Primary Jurisdiction Primary Jurisdiction Recent Ninth Circuit cases Astiana PJ appropriate on all natural claims (but district court erred by dismissing rather than staying) Reid PJ inappropriate where FDA issued guidance in 2003 and did not indicate it would revisit Stays in ECJ cases Other recent decisions Backus (N.D. Cal. 2015) PJ appropriate where FDA action on trans fats anticipated Zakaria (C.D. Cal. 2015) PJ inappropriate, no complex issue or issue of first impression Perkins Coie LLP PerkinsCoie.com 14

15 Corporate Responsibility Class Actions Allege defendants failed to disclose use of forced labor in supply chain Theory: consumers injured by alleged coercive labor practices Tied to Cal. Supply Chain Transparency Act Perkins Coie LLP PerkinsCoie.com 15

16 Corporate Responsibility Class Actions Cat food Challenge labor conditions of Thai fishermen Sud v. Costco Wholesale Corp. (N.D. Cal.) Barber v. Nestle USA Inc. (C.D. Cal.) MTD pending: multiple sources of fish; impossible to trace back to alleged forced labor sources Wagner v. Mars Inc. (C.D. Cal.) Chocolate Complaints allege child labor practices in Africa Hodson v. Mars Inc., (N.D. Cal.) Dana v. Hershey Co. (N.D. Cal) McCoy v. Nestle USA Inc. (N. D. Cal.) Perkins Coie LLP PerkinsCoie.com 16

17 Compare At Pricing Suits Theory: compare at and former prices are misleading, overstated, sham prices. Outlet and discount stores are prime targets. California law prohibits advertising a former price unless the alleged former price was the prevailing market price within preceding three months. Cal. Bus. & Prof. Code Perkins Coie LLP PerkinsCoie.com 17

18 Compare At Pricing Suits Dozens of retailers targeted: Gattinella v. Michael Kors (S.D.N.Y. 2014) (Settled for $4.9M) Branca v. Nordstrom (S.D. Cal. 2014) (Motion to dismiss SAC denied) Cabrera v. Kenneth Cole (S.D.N.Y. 2015) Horosny v. Burlington Coat Factory (C.D. Cal. 2015) Jacobo v. Ross Stores (C.D. Cal. 2015) Chester v. TJ Maxx (C.D. Cal. 2015) Berkoff v. Marshalls (C.D. Cal. 2015) Metoyer v. HomeGoods (C.D. Cal. 2015) Sperling v. DSW (C.D. Cal. 2015) Perkins Coie LLP PerkinsCoie.com 18

19 Defending False Advertising Class Actions Ali R. Rabbani Winston & Strawn (213) Winston & Strawn LLP

20 Agenda Substantive Motions and Defenses Failure to Plead False or Misleading Representations Materiality and Puffery Failure to Plead Reliance or Causation Preemption and Related Defenses Defeating Class Certification Removal 2015 Winston & Strawn LLP 20

21 Failure to Plead False or Misleading Representations Fink v. Time Warner Cable, 837 F. Supp. 2d 279 (S.D.N.Y. 2011), aff d, 714 F.3d 739 (2d Cir. 2013) The Southern District of New York dismissed false advertising claims under California and New York law. The court found that plaintiffs insufficiently alleged that Time Warner s advertised internet speeds were misleading. In particular, Time Warner s claims of speeds up to 3x faster than DSL and 100x faster than dial-up were not misleading because plaintiffs allegations only related to specific computer applications, not their internet connections as a whole. The court also found that a reasonable consumer would not be misled because the advertisements were qualified with the phrase up to. Manchouck v. Mondelez Int l Inc., 2013 WL (N.D. Cal. 2013) The Northern District of California dismissed false advertising class action based on assertion that the made with real fruit label on Nabisco s strawberry and raspberry Newton cookies was misleading. The Court found that the complaint s allegations were insufficient to meet the reasonable consumer standard Winston & Strawn LLP 21

22 Failure to Plead False or Misleading Representations Mason v. The Coca-Cola Co., 774 F. Supp. 2d 699 (D.N.J. 2011) The District of New Jersey dismissed plaintiffs claim that "Diet Coke Plus" was deceptively advertised as healthy and containing nutritional value. The court found that Coca-Cola s claims were not false because Diet Coke Plus did, in fact, contain vitamins and minerals. Loreto v. Procter & Gamble Co., 2013 WL (6th Cir. 2013) The Sixth Circuit affirmed, in part, the Southern District Ohio s dismissal of false advertising claims under Ohio and New Jersey law. The court found that all but one of defendant s claims relating to the cold medicine with vitamin C were neither false nor plausibly misleading. Wright v. General Mills, Inc., 2009 WL (S.D. Cal. 2009) The Southern District of California dismissed UCL, FAL, and CLRA claims, finding that plaintiff failed to allege that defendant s use of 100% Natural on granola bar labeling and advertising was misleading under Twombly/Iqbal Winston & Strawn LLP 22

23 Materiality and Puffery Elias v. Hewlett Packard Co., 950 F. Supp. 2d 1123 (N.D. Cal. 2013) The Northern District of California dismissed false advertising claims under California law. The Court found that the alleged misrepresentation of compact but powerful amounted to non-actionable puffery because it says nothing about the specific characteristics or components of the computer. Hughes v. Panasonic Consumer Electronics Co., 2011 WL (D.N.J. July 21, 2011) Marketing televisions as having industry leading black levels and contrast ratios. The District of New Jersey found that Panasonic s alleged misrepresentations about the Televisions industry leading technology and features, which create superior image and color quality, are not statements of fact, but rather subjective expressions of opinion. In re Ferrero Litig., 794 F. Supp. 2d 1107 (S.D. Cal. 2011) Advertising Nutella as healthy. The Southern District of California noted that [g]eneralized, vague, and unspecified assertions constitute mere puffery upon which a reasonable consumer could not rely. However, the court denied the motion to dismiss because a reasonable consumer could be deceived Winston & Strawn LLP 23

24 Materiality and Puffery Baltazar v. Apple, Inc., 2011 WL (N.D. Cal. Dec. 22, 2011) Apple s statement that the ipad can be used just like a book. The Northern District of California found such claim was mere puffery. Vitt v. Apple Computer, Inc., 2012 WL (9th Cir. Feb. 28, 2012) Apple s advertisement of ibook G4 as mobile, durable, portable, rugged, built to withstand reasonable shock, reliable, high performance, high value, an affordable choice, and an ideal student laptop. The Ninth Circuit affirmed that these statements are generalized, non-actionable puffery because they are inherently vague and generalized terms and not factual representations that a given standard has been met Winston & Strawn LLP 24

25 Failure to Plead Reliance or Causation In re Actimmune Mktg. Litig., 2010 WL (N.D. Cal. Sept. 1, 2010), aff d, 2011 WL (9th Cir. Dec. 30, 2011) The Northern District of California dismissed UCL claims for failure to allege reliance on allegedly misleading representations. Consumers failed to allege that their prescribers believed that the drug was effective for the challenged indication as a result of allegedly fraudulent off-label promotion. Payers failed to allege that prescribers relied upon off-label promotion as opposed to perfectly legitimate channels of communication with defendant. Cleary v. Philip Morris Inc., 656 F.3d 511 (7th Cir. 2011) The Seventh Circuit affirmed dismissal of putative class action complaint, holding that plaintiffs failed to state a claim for unjust enrichment, even assuming that Illinois recognized an independent tort, where they alleged no deception, causation, or harm Winston & Strawn LLP 25

26 Preemption and Related Defenses Hairston v. South Beach Beverage Co., 2012 WL (C.D. Cal. May 18, 2012) Plaintiff challenged the labeling of SoBe Lifewater, including: (1) the statement all natural with vitamins because some of the vitamin ingredients were synthetic; (2) fruit names used to describe Lifewater flavors even though Lifewater doesn t contain any fruit; (3) using a vitamin s common name (e.g., B 12 ) when it is synthetic. Ruling on a motion to dismiss, the court held that plaintiff s claims relying on the fruit and vitamin names were preempted. FDA allows the use of fruit names/images to describe the characterizing flavor of the product (even if product doesn t contain fruit). FDA regulations treat natural and synthetic vitamins as equivalent Winston & Strawn LLP 26

27 Preemption and Related Defenses Astiana v. Dreyer s Grand Ice Cream, Inc., 2012 WL (N.D. Cal. July 20, 2012). The Northern District of California held that (1) plaintiff stated claims that All Natural Flavors and All Natural Ice Cream slogans were misleading, and (2) claims were not preempted by the Food, Drug & Cosmetic Act and FDA regulations (but dismissed claim under Magnuson-Moss Act). Taradejna v. General Mills, Inc., 12-cv (D. Minn.) (Dec. 10, 2012 Order) Plaintiffs challenged General Mills use of Milk Protein Concentrate in its Greek Yogurt products. Minnesota federal court dismissed claims because FDA had primary jurisdiction over the underlying question of whether yogurt could contain milk protein concentrate Winston & Strawn LLP 27

28 Class Definition Ascertainability. Are class members objectively identifiable? Carrera v. Bayer Corp., 727 F.3d 300 (3d Cir. 2013) Denying certification where there was no reliable, administratively feasible method to determine class membership. Overbreadth. Does the class definition include persons without claims? Sanders v. Apple Inc., 672 F. Supp. 2d 978 (N.D. Cal. 2009) Striking class allegations where definition would include owners of computers who neither purchased them nor saw ads, individual reliance issues would predominate, and different state laws would apply. Failsafe. Does the definition incorporate merits inquiry? This is often done in order to avoid overbreadth, causing the class to be unascertainable without detailed inquiry Winston & Strawn LLP 28

29 Commonality Wal-Mart Stores, Inc. v. Dukes, 131 S. Ct (U.S. 2011) Commonality requires the plaintiff to demonstrate that the class members have suffered the same injury. This does not mean merely that they have all suffered a violation of the same provision of law. Their claims must depend upon a common contention - for example, the assertion of discriminatory bias on the part of the same supervisor. That common contention, moreover, must be of such a nature that it is capable of classwide resolution which means that determination of its truth or falsity will resolve an issue that is central to the validity of each one of the claims in one stroke. Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013) Suggested that need to calculate invidualized damages may, on its own, defeat class certification. Pulaski & Middleman, LLC v. Google, Inc., 802 F.3d 979 (9th Cir. 2015). The Ninth Circuit reaffirmed that damages calculations alone cannot defeat class certification Winston & Strawn LLP 29

30 Adequacy and Typicality Major v. Ocean Spray Cranberries, Inc., 2013 WL (N.D. Cal. June 10, 2013) A plaintiff who seeks to bring claims for products she did not purchase is atypical. In re Aqua Dots Products Liability Litig., 654 F.3d 748 (7th Cir. 2011) A plaintiff who seeks class-wide relief already available through defendant s voluntary refund program does not fairly and adequately represent class members. Plaintiffs want relief that duplicates a remedy that most buyers already have received, and that remains available to all members of the putative class. A representative who proposes that high transaction costs (notice and attorneys' fees) be incurred at the class members' expense to obtain a refund that already is on offer is not adequately protecting the class members' interests. Peviani v. Natural Balance Inc., 2011 WL (S.D. Cal. May 2, 2011) A plaintiff who does not share the same injuries is an inadequate representative, and her claims are not typical. Holding that wife of user of performance enhancement product failed to satisfy adequacy and typicality requirements because she did not suffer injuries users may have suffered Winston & Strawn LLP 30

31 Predominance and Superiority Pelman v. McDonald s Corp., 272 F.R.D. 82 (S.D.N.Y. 2010) Individual questions: Whether class members purchased because they believed the products were healthful. Causal relationship between fatty, salty food and alleged health conditions. Sources of food consumed. The Southern District of New York denied class certification. Rule 23(c) issue certification also denied for lack of proof of numerous persons of age who relied upon advertising and suffered health effects as a result Winston & Strawn LLP 31

32 Predominance and Superiority Weiner v. Snapple Beverage Corp., 2010 WL (S.D.N.Y. Aug. 5, 2010) (denying certification). The Southern District of New York denied class certification. Claim that consumers paid more for beverages because of All Natural labeling could not be proved on a class-wide basis (causation and actual injury). Economist s contention that he could develop models showing injury to all consumers was speculative and insufficient. The potentially millions of class members were also unascertainable, since purchasers likely did not retain receipts Winston & Strawn LLP 32

33 Nationwide Classes Mazza v. Am. Honda Motor Co., 666 F.3d 581, 596 (9th Cir. 2012) District Court certified a nationwide class. Ninth Circuit decertified the nationwide class: Common questions did not predominate: [V]ariances in state law overwhelm common issues and preclude predominance for a single nationwide class. No presumption of reliance: California-only class would fail because the class would almost certainly include[] members who were not exposed to, and therefore could not have relied on, Honda's allegedly misleading advertising material. Red v. Kraft Foods Inc., 2011 WL (C.D. Cal.) Declining to certify a nationwide class based solely on the grounds that Kraft engaged in nationwide marketing. (Sept. 29, 2011) Renewed motion for class cert. denied because even under subclasses individual class members, to recover, would need to show, at a minimum, proof of how many purchases they made of the offending products, where and when, in order to discern [damages]. (Oct. 26, 2012) 2015 Winston & Strawn LLP 33

34 Nationwide Classes Ries v. Arizona Beverages USA LLC, 287 F.R.D. 523 (N.D. Cal. 2012) Plaintiffs challenged all natural labeling on Arizona iced tea drinks that contain high-fructose corn syrup and citric acid. Plaintiffs sought certification under Rule 23(b)(2). Injunctive relief class certified Monetary relief rejected Plaintiffs sought monetary restitution that would require individualized assessments of damages based on the number of products bought. Even though the amount of damages could be calculated based on overall beverage sales, it would be unmanageable under Rule 23(b)(2), which lacks Rules 23(b)(3) s notice and opt-out requirements designed to facilitate the award of monetary damages to individual class members Winston & Strawn LLP 34

35 Removal Class Action Fairness Act Jurisdiction based on minimal diversity. Amount in controversy is $5 million or more. Class of 100 or more members. Common question of law or fact. Advantages of Federal Court Often more favorable procedure and procedural law. Coordination (especially after Smith v. Bayer, 131 S. Ct (2011)) Potentially more effective enforcement of judgments. Potential Disadvantage Shady Grove Orthopedic Assocs. v. Allstate Ins. Co., 130 S. Ct (2010) (holding that state law class action prohibitions that are procedural rather than substantive do not supersede Rule 23 in federal court) Winston & Strawn LLP 35