Consumer Advertising Law Blog

Third Circuit Affirms Dismissal of Food Class Action on Preemption Grounds

The Third Circuit recently upheld the dismissal of a class action complaint against Johnson & Johnson (J&J) challenging the labeling of its Benecol Spreads bearing the statements “No Trans Fat” and “Proven to Reduce Cholesterol.”  The plaintiff argued that these statements were false and misleading because Benecol contains trace amounts of trans fat, which the plaintiff alleged may be harmful to heart health.

A three-judge panel affirmed the district court’s ruling that the Nutrition Labeling and Education (NLEA) preempted the plaintiff’s claims.  The NLEA expressly preempts state food-labeling requirements that are not identical to the requirements in the Food, Drug and Cosmetic Act and its implementing regulations.  In this case, two federal regulations were directly on point and governed the statements regarding trans fat and cholesterol-lowering benefits.

FDA regulations require certain nutritional information on food packaging, including a statement of the number of grams of trans fat in a serving.  The regulations further require where a serving contains less than 0.5 grams of trans fat, the content should be expressed as zero.  The regulations deem these amounts to be “insignificant” for purposes of stating nutrition content.  FDA regulations also allow statements of “no fat” and “no saturated fat” when a product contains less than 0.5 grams per serving, an insignificant amount.  Relying on these regulations, the Third Circuit concluded that Benecol’s “No Trans Fat” claim is authorized by the NLEA.  Because the plaintiff was seeking to enforce a requirement different from what the NLEA allows, the panel found his claims expressly preempted.  This decision is in accord with the Ninth Circuit, which similarly held that a claim challenging a “No Trans Fat” statement was preempted when the amount of trans fat was required to be rounded to zero in the nutrition facts panel.  Carrea v. Dreyer's Grand Ice Cream, Inc., 475 Fed. Appx. 113, 115 (9th Cir. 2012).

Cholesterol claims are also governed by FDA regulations.  Specifically, the regulations provide for health claims “which summarize the relationship between diets that include plant sterol/stanol esters and the risk of [heart disease] and the significance of the relationship.”  The regulations further identify a threshold amount of plant sterols that a product must contain in order to make such a health claim.  Based on these regulations, the Third Circuit concluded that the cholesterol claims were authorized by statute, and thus the NLEA expressly preempted plaintiff’s attempt to bar those claims. 

This decision, cited as Young v. Johnson & Johnson, No. 12-2475, 2013 WL 1911177 (3d Cir. May 9, 2013), has been designated non-precedential.

- Angel Garganta & Jonathan Koenig

Gov. Jerry Brown Proposes “Update” to California’s Notorious Warning Law

On May 7, 2013, California Governor Jerry Brown announced plans to “update” Proposition 65, the 1986 voter initiative that is at the top of the list of laws that give California a bad name in the business community.  Recognizing that there have been examples of “unscrupulous lawyers driven by profit rather than public health,” the Governor’s proposals would seek to impose additional requirements on private plaintiffs and their attorneys.  The proposals would also take aim at changes to the law’s standard for when warnings are required and what certain types of warning messages should say. 

Proposition 65 allows private enforcers to bring actions “in the public interest” without requiring any showing of harm.  Private enforcers can seek civil penalties of up to $2,500 per violation per day as well as injunctive relief.  Plaintiffs who settle or prevail in litigation can seek to recover reasonable attorneys’ fees.  Public enforcers like the California Attorney General can also enforce the law, but over 90 percent of cases are brought by private plaintiffs.  Millions of dollars change hands under Proposition 65, hundreds of lawsuits are filed each year, and signs are plastered all over California from parking garages to hotel lobbies, from restaurant entrances to Starbucks condiment stations.

The Governor has been a critic of certain aspects of Proposition 65 since his time as Attorney General.  In consultation with his successor as Attorney General, Kamala Harris, he has outlined concepts for reform, but he has not yet proposed specific language for the amendments.  Key features highlighted in the Governor’s press release are the following: 

• Place restrictions on attorney’s fees in Proposition 65 cases.
• Require stronger demonstration by plaintiffs that they have information to support claims before litigation begins.
• Require greater disclosure of plaintiff’s information.
• Set limits on the amount of money in an enforcement case that can go into settlement funds in lieu of penalties.
• Provide the State with the ability to adjust the level at which Proposition 65 warnings are needed for chemicals that cause reproductive harm.
• Require more useful information to the public on what they are being exposed to and how they can protect themselves.

These are fleshed out in somewhat greater detail in a white paper. In the coming weeks, the Governor’s office intends to convene “working groups” of “stakeholders” to consider these conceptual proposals.  Some may be implemented through changes to the Proposition 65 implementing regulations, while others will take legislation.  According to the ballot initiative, Proposition 65 can only be amended by a two-thirds vote of the State Assembly and the State Senate, and then only to “further its purposes.”  The Governor’s staff intends to press for changes to be adopted in 2013, apparently building on the momentum garnered by a narrowly tailored bill that has already been introduced to allow businesses time to “cure” alleged Proposition 65 violations once they are notified.

Since its passage by voter initiative over 25 years ago, Proposition 65 has been amended in significant part only once.  That amendment, which was intended to impose additional requirements on private plaintiffs, has not prevented shakedown lawsuits.  Moreover, those additional requirements have had the unintended consequence of increasing the attorneys’ fees demands made to companies and the time and expense involved in resolving Proposition 65 claims.

Although some of the reforms outlined by the Governor could be helpful to companies, they do not address a number of concerns raised by the business community in recent years.  Whether those concerns may be addressed in the working groups remains to be seen.  Moreover, the proposed reform for warnings could result in an overhaul of the longstanding ways in which thousands of companies doing business in California have designed their Proposition 65 compliance programs. 

Businesses should be engaged in and monitor the stakeholder discussions.  The devil will be in the details.

- Trent Norris, Sarah Esmaili, and Ginamarie Caya

Supreme Court's Comcast Decision Makes Consumer Class Actions Tougher To Certify

By now, most people likely have heard about the US Supreme Court’s decision in Comcast Corp. v. Behrend on March 27, 2013. Comcast is a lawsuit brought by cable subscribers who claim that Comcast monopolized Philadelphia’s cable market through “anticompetitive clustering.” The lower courts had ruled that a class of as many as two million cable subscribers in the Philadelphia area could bring their claims collectively in a single class action. The Supreme Court, however, ruled that class-wide treatment of these claims was improper because the plaintiffs did not provide a class-wide method for calculating the individual subscriber’s damages.  

In an opinion authored by Justice Scalia and joined by Chief Justice Roberts and Justices Kennedy, Thomas and Alito, the Court began by reaffirming the standards that apply when determining whether Rule 23’s requirements are satisfied.  In accord with its 2011 decision in Wal-Mart v. Dukes, the Court explained that parties must satisfy the requirements for class certification with “evidentiary proof” and that courts must undertake a “rigorous analysis” when evaluating whether those requirements are met, even if that analysis overlaps with the merits in the case. The Court continued by holding that a party seeking class certification must offer a class-wide means for calculating damages. The Court then explained that the plaintiffs in Comcast had failed to do this.  As the Court explained, “under the proper standard for evaluating certification, respondents’ model falls far short of establishing that damages are capable of measurement on a classwide basis.” 

Comcast is a profoundly significant and positive development for companies facing class actions.  In holding that a plaintiff seeking certification of a damages class under Rule 23(b)(3) must establish, through “evidentiary proof,” that damages can be measured on a classwide basis, Comcast imposes a significant hurdle to certification in cases where individual damage calculations are required.  Comcast also makes clear that the trial court must probe the merits of the claim at the certification stage to ensure that the method for measuring damages (or for proving other elements of their claims) fits the plaintiffs’ theories of liability and is not arbitrary.  The Court’s decision will make it substantially more difficult for many purported class actions to obtain certification, and will render vulnerable many classes that have already been certified. 

Comcast also should make it more challenging for plaintiffs bringing consumer fraud claims to obtain class certification. Indeed, earlier this week, the Supreme Court confirmed that Comcast is relevant outside of the antitrust context and could present obstacles to class-wide treatment of consumer protection claims when it vacated the decision in In re Whirlpool Corp. Front-Loading Washer Products Liability Litigation and instructed the Sixth Circuit to revisit, in light of Comcast, whether that case could go forward as a class action.

Whilrpool is a lawsuit brought by purchasers of certain Whirlpool washing machines who claim those machines were defective. The lawsuit claims that, as a result of certain design features, residue accumulates in the brands of washing machines which can cause mold and mildew to grow inside the machines, resulting in ruined laundry and offensive odors. The trial court certified a class of all Ohio consumers who had purchased these washing machines for domestic use.  Whirlpool argued that treating all purchasers of these washing machines on a class-wide basis would be improper for several reasons, including that many consumers never experienced a mold problem and that consumers’ laundry habits and experiences with the machines varied widely. Despite such differences, the lower courts concluded that class certification was appropriate. The trial court explained that whether some consumers had not experienced a mold problem was a merits question that did not prevent it from certifying a class.  The Sixth Circuit also rejected Whirlpool’s argument that many consumers never experienced a mold problem, explaining that “the class plaintiffs may be able to show that each class member was injured at the point of sale upon paying a premium price” even if their machines had not manifested a defect. 

Although it is not entirely clear what the Sixth Circuit will do now that the Supreme Court has returned the case to it, defendants certainly have arguments that the lower courts’ approach violated the standard set forth in Comcast. For instance, Comcast holds that plaintiffs must come forward with “evidentiary proof” to satisfy the requirements of Rule 23, and cannot offer only an assurance that they “may be able” to prove something at trial. Moreover, Comcast holds that, for a class action seeking damages to proceed, those damages must be capable of class-wide resolution. The company thus can argue that individual damages questions, among other things, prevent plaintiffs’ claims from proceeding on a class-wide basis.  

Whatever direction the Sixth Circuit takes, the fact that the Supreme Court sent the case back to the lower courts based on Comcast makes one lesson clear: Comcast will have significant implications for class actions seeking monetary damages in many contexts, including consumer fraud cases. 

- Jamie Speyer, David Kouba, and Kelly Smith

Super-Sized Portions Live On In NYC; May Gain Protection in Mississippi

By now, you’ve probably heard that the Bloomberg administration experienced a significant setback on last week when a state judge invalidated the New York City Mayor’s attempt to limit the serving size of sugary drinks sold in the city.  The so-called “soda ban” -- or, as Bloomberg calls it, the “Portion Cap Rule” -- was heavily opposed by the soda companies and relatively unpopular among New Yorkers.

In the decision, Justice Milton Tingling of the State Supreme Court was persuaded by arguments made by the petitioners seeking to enjoin the implementation and enforcement of § 81.53 of the New York City Health Code. Justice Tingling first found that the regulation violates the constitutional separation of powers in New York State, as governed by the Boreali v. Axelrod. The court noted that “[t]he Rule would not only violate separation of powers doctrine, it would eviscerate it.”  Id. at 35.

Justice Tingling went on to hold that the administrative regulation was “arbitrary and capricious because it applies to some but not all food establishments in the City, it excludes other beverages that have significantly higher concentrations of sugar sweeteners and/or calories on suspect grounds, and the loopholes inherent in the Rule, including but not limited to no limitations on re-fills, defeat and/or serve to gut the purpose of the Rule.”

While the Bloomberg administration decides whether to appeal the decision, legislators in Mississippi are doing their best to ensure that a regulation like the Portion Cap Rule never sees the light of day in their hometowns. Last Tuesday, the Mississippi legislature passed a bill, known as the “Anti-Bloomberg Bill,” barring counties and towns from enacting rules that require the posting of calorie counts, cap portion sizes, or prohibition of “consumer incentive items” such as toys in kids’ meals.  The bill is expected to be signed by the Mississippi governor Phil Bryant.

We have previously reported on the struggles of implementing government regulation on food, including the FDA’s recent national menu labeling and calorie content rules. It remains to be seen whether the apparent failure of Mayor Bloomberg’s initiative is a mere hiccup in an increasing trend of government intervention in public health, or whether the decision (and measures such as those potentially implemented in Mississippi) signals a stronger backlash against such government regulation.

- Carolyn Pearce

Can I Have Your Zip Code, Please? Massachusetts Supreme Judicial Court Says, "No"

In answering a certified question from the United States District Court for the District of Massachusetts, the Massachusetts Supreme Judicial Court recently held that a merchant violated state privacy law when it recorded a customer’s zip code during a credit card transaction. According to the unanimous view of the justices of the highest court of Massachusetts, a zip code constitutes an “address” and is thus “personal identification information,” the collection of which in a credit card transaction is prohibited by a state consumer data protection statute.

The question of a zip code’s status was among three questions certified to the Court in Tyler v Michaels Stores, a class action filed in federal district court by a plaintiff who claimed the defendant retailer illegally collected and used her zip code information to send her unsolicited marketing materials.  According to the complaint, a Michaels Stores employee asked the plaintiff for her zip code while she was using her credit card to pay for a retail purchase. Allegedly under the mistaken impression that the zip code was required to complete the credit card transaction, the plaintiff provided her zip code.  Michaels allegedly used the plaintiff’s zip code, together with the plaintiff’s name, to find her address in publicly available databases, and then mailed her unwanted and unsolicited marketing materials. 

The federal district court, taking the allegations of the complaint as true for threshold legal interpretive purposes, held that Michaels Stores’ alleged conduct violated a Massachusetts statute prohibiting a business from recording on a credit card transaction form any “personal identification information” not required to complete the credit card transaction. However, the district court determined that the state law interpretations required to reach that holding were sufficiently complex and important to merit consideration by the state’s highest court. The district court thus certified the zip code status question, as well as two other questions (“may a plaintiff bring an action for this privacy right violation absent identity fraud?” and “may the words ‘credit card transaction form’ refer equally to an electronic or paper transaction form?”) for review by the state court.

In its recent decision, the Massachusetts Supreme Judicial Court found that a consumer’s zip code constitutes “personal identification information” for several reasons, largely informed by current-day realities of information availability and the public policy goals underlying the Massachusetts statute.  The statute lists addresses and telephone numbers as non-exhaustive examples of “personal identification information.”  The court reasoned that the purpose of the statute -- to protect consumer privacy -- would be undermined by interpreting “personal identification information” to exclude a consumer’s zip code, as that would effectively mean a merchant could simply collect a consumer’s zip code and use it, together with the consumer’s name, to identify through publicly available databases, and then record and use, the consumer’s address or telephone number. (On the other two certified questions, the court held that a consumer may bring a claim under the statute even if she is not the victim of identity fraud (but cannot prevail without showing actual injury from the unlawful collection of the zip code) and that the statute applies equally to both written and electronic credit card transactions.)

The reasoning of the Massachusetts Supreme Judicial Court in Michaels Stores is similar to that of the California Supreme Court in its 2011 decision in Pineda v. Williams-Sonoma Stores, Inc. In Pineda, the California Court similarly opined that permitting a retailer to obtain a consumer credit card holder’s zip code, when obtaining the consumer’s address or phone number is an express violation of state privacy law, would allow an “end-run” around that law, because zip code information could then “easily be used to locate the cardholder’s complete address or phone number.” As we wrote at the time, the Pineda decision has “broad exposure implications” for business, as it means that virtually any information pertaining to a consumer may be “protected” under state credit card privacy laws.  The Massachusetts decision underscores this point, and indicates that courts may be increasingly willing to interpret consumer privacy laws broadly to take account of the possibilities for accessing extensive personal information using bits and pieces of data that, in and of themselves, may be innocuous from a privacy perspective.

- Nancy Perkins and Daniel Stuart

 

Image courtesy of Brianga via Wikipedia Commons / CC-BY-SA-3.0

“Gym, Tan, Laundry,” Lawsuit?

Although the televised adventures of Snooki, Jwoww, The Situation, and many others, came to a close in December, following the end of the sixth and final season of MTV’s “Jersey Shore,” their spirit lives on in the mantra “gym, tan, laundry” (“GTL”) and three spinoffs (as of this writing).  But on January 17, it also lives on in a complaint filed with the FTC.

The complaint, filed by the Skin Cancer Foundation, urges the FTC to investigate the conduct of MTV in encouraging and promoting “cancer causing behavior without a warning of the risk.”  Specifically, the Foundation alleges that MTV’s youth-oriented show portrays “excessive tanning . . . as a socially enhancing, safe and beneficial activity while omitting its dangerous, cancer causing effects . . . .”  In its marketing of the “Jersey Shore,” and the related tanning or GTL merchandise and promotions, MTV allegedly failed to warn viewers properly of the risks and harms associated with tanning, including cancer.  Instead, the Foundation claims MTV refused to provide such warnings following a formal request by the Foundation.  Although MTV does not operate tanning salons, the Foundation asserts that MTV’s failure to provide such warnings increases the risk of cancer to the public, particularly the younger viewers of the “Jersey Shore,” because MTV “portray[s] tanning as beneficial and safe, in violation of Section 5 of the Federal Trade Commission Act.”  The Foundation’s complaint alleges this practice is deceptive.

In asserting its Section 5 claim, the Foundation relied on the FTC’s Policy Statement on Deception, which provides, in short, that advertisers should not convey through admission or omission an inaccurate impression of the safety, benefits or risks of a product, service or procedure.  The Foundation also drew parallels between the MTV’s portrayal of tanning and the portrayal of alcohol and tobacco in movies and on television prior to the FTC’s recommendation of advertising limitations for alcohol and the prohibition of tobacco advertising on television. 

The complaint also cites an earlier FTC enforcement actions related to tanning.  A little over three years ago, as this blog reported, the FTC settled claims against the Indoor Tanning Association, which conducted a national advertising campaign touting the lack of increased cancer risk, the health benefits, and relative safety of indoor tanning compared to outdoor tanning. That consent decree required the Association to cease making these claims and to warn consumers that “exposure to ultraviolet radiation may increase the likelihood of developing skin cancer and can cause serious eye injury.” 

The Foundation urges the FTC to require MTV to provide a clear and conspicuous warning of the risks associated with tanning on all “Jersey Shore” broadcasts, websites, advertisements, tanning-related games, and GTL merchandise.  MTV has responded that it “regularly engages its audience on a whole host of youth related issues, including sexual health, mental health, dating abuse, skin cancer and others. . . . Ultimately, we’ve seen time and time again that our audiences can be trusted to understand the difference between entertainment and responsible and safe behavior to act accordingly.”

It is not clear at this point whether the FTC will act. MTV’s business may have expanded far beyond broadcasting music videos, but the lack of MTV Tanning Salons may be enough to stave off FTC action.  We will be sure to let readers know about any FTC action taken on this complaint. For more information about the Jersey Shore, please consult your local celebrity gossip site.

- Seth Wiener and Matthew Shultz

Wal-Mart’s Holiday Price Comparison Advertisements Irk Competitors

Retailers, including Best Buy, Toys ‘R’ Us, and several regional supermarket chains, have filed complaints with at least six state attorneys general regarding Wal-Mart’s price comparison advertisements, which ran during the 2012 holiday season.  Wal-Mart’s ad campaign purported to compare its prices on specific items to those of competitors.  The retailers who have complained maintain that the advertisements were misleading in several ways, including comparing different models of the same product, citing incorrect competitor prices, and advertising products that were in low stock at Wal-Mart Stores. 

The retailers’ complaints were filed in Michigan, Illinois, Pennsylvania, Missouri, Florida and New Jersey pursuant to those states’ various false advertising or anti-deceptive advertising statutes.  Although laws can vary significantly by state, most state false advertising laws have a few main elements in common: all statements in an advertisement, whether express or implied must be truthful, and must not reflect an effort to deceive the consumer.  The complaints are apparently in various stages of review and investigation and it remains unclear how the attorneys general will proceed. 

Best Buy claims that Wal-Mart’s advertisement offering a Dell laptop computer for $251 less than Best Buy was misleading because it did not compare the two retailers’ prices for the same product.  According to Best Buy, the Dell laptop Best Buy offered for the price cited in Wal-Mart’s advertisement had different specifications and longer battery life than the one offered at Wal-Mart.  Best Buy also alleged that Wal-Mart advertised the iPhone 5 for $150 even though it had an insufficient stock of the iPhones.  Best Buy states that it lost several thousands of dollars because it was forced to sell the iPhone 5 for $150 due to its price matching policy.

Toys ‘R’ Us similarly claims that Wal-Mart heavily advertised one of the season’s hottest toys, the Fijit, even though the toy was not available through Wal-Mart’s website and was out of stock at several of its stores.  Other retailers dropped their prices in response to the advertisements.  Toys ‘R’ Us also claims that Wal-Mart’s advertisements for the Fisher-Price Surprise Kitchen and Table Set and the Holiday Barbie incorrectly stated the price of the toys at Toys ‘R’ Us.

In 1994, Wal-Mart settled a dispute involving similar claims with Michigan’s attorney general.  Following complaints by Target Corp., Meijer Inc., and Kmart Corp., Wal-Mart agreed to make changes to its price comparison advertisements, including no longer comparing dissimilar products.

The FTC has guidance in this area. The Guides Against Deceptive Pricing permit retail price comparisons where the comparison is “based upon fact” and is not “fictitious or misleading.” This means, among other things, that the products being compared must be comparable or competing -- i.e., of like grade and quality.  The Guides Against Bait Advertising prohibit a retailer from advertising merchandise unless it has sufficient inventory to satisfy reasonably anticipated demand, or clearly disclose that supplies are limited or that the merchandise is available only at certain locations.

Wal-Mart stands by its price comparison advertising campaign, and the company has responded to attorneys general in four states, addressing complaints by Toys “R” Us and regional supermarkets. The flurry of complaints by Wal-Mart’s competitors serve as a reminder that businesses should exercise caution in verifying not only express price comparisons but also those that are implied. 

- Christina Brenha and Amie Medley

A Wrinkle in Plaintiff’s Purported Class Action: Court Denies Certification of Case Against Neutrogena

In a recent federal California district court decision, Chow v. Neutrogena Corp, the Court denied plaintiff’s motion seeking to certify a nationwide class of consumers alleging that Neutrogena falsely represented that certain anti-wrinkle products were “clinically proven” to a cause a person to look younger. The district court held that plaintiff, when put to the “rigorous analysis” required by the Supreme Court’s watershed decision in Wal-Mart Stores, Inc. v. Dukes did not satisfy the elements required to obtain class certification.

The Court began, relying on Dukes, by denying plaintiff’s request to seek certification of an injunctive class only, pursuant to Federal Rule of Civil Procedure 23(b)(2), noting that “given the magnitude of the dollar amount of restitution at stake and the lack of adequate injunctive remedy to relieve the alleged class injuries, it is evident that money damages are the true purpose of this action.”  The Court went on to reject certification under the more stringent Rule 23(b)(3) requirements, which mandate class certification only if questions of law or fact common to class members are predominate over questions affecting only individual members. In particular, the Court noted that there were significant individualized questions about whether the product worked as advertised, and “[r]esolving this question would necessitate consulting each class member individually to determine if they experienced the advertised result.” Thus, the Court rejected plaintiff’s suggestion in her motion papers that the allegation of “paying for a worthless product” was sufficient to establish a common injury.

The decision further held that plaintiff’s Consumer Legal Remedies Act (CLRA) and express warranty claims failed for the additional reason that demonstrating reliance was an individualized issue.  The Court rejected the argument that the alleged misrepresentations could be subject to an inference of classwide reliance, particularly because a significant number of consumers were repeat purchasers.  The Court noted that plaintiff failed to provide “significant proof to distinguish between mere favorability toward products bearing the Neutrogena brand . . . and reliance upon specific advertised benefits” or to distinguish “repeat purchasers who actually received benefits.”

The decision highlights the obstacles plaintiffs may face in obtaining certification of consumer class actions in the post-Dukes environment. And it suggests that at least some courts will not consider simply asserting that all purported class members suffered the same injury of “paying for a worthless product” as sufficient to satisfy the commonality standard, but will apply a far more rigorous analysis.

- Rachel Chanin

 

“This Call May Be Recorded” . . . But Don’t Count on This Disclaimer

Last August, Mr. Rea Perea called Humana Pharmacy, Inc. to talk about his erectile dysfunction.  He says he didn’t learn until later that his call was recorded. So, not surprisingly, he sued. He alleged that Humana violated California’s ban on recording confidential communications without the consent of all parties. 

Humana moved to dismiss the class action complaint on several grounds. On January 23, 2013, the U.S. District Court for the Central District of California rejected all of Humana’s arguments.

First, Humana made the factual argument that Mr. Perea lacked Article III standing because he didn’t suffer an injury to a legally protected interest. Humana challenged Mr. Perea’s standing under Rule 12(b)(1), declaring that Mr. Perea couldn’t have been injured because Humana plays a recording at the beginning of every call disclosing that “calls may be recorded.” The court said that factual argument, which went to the merits of the case, was better addressed under Rule 12(b)(6) (failure to state a claim). So it dismissed that part of Humana’s motion.

Second, the court ruled that if Humana really did warn Mr. Perea that his call would be recorded, it could introduce evidence of that fact on summary judgment. But on a motion to dismiss, where Mr. Perea alleged he wasn’t informed his call would be recorded, the court was forced to believe Mr. Perea (at least for the time being).

Third, Humana raised the legal argument that the California statute contains an exception for “service observing,” which is the practice of recording calls so that supervisors can monitor and improve the quality of service provided by a company’s customer service agents. The court found that Humana didn’t fully support the argument, in part because it failed to deal with contrary authority from the California Court of Appeal. Further, it wasn’t clear from the complaint that Humana’s purpose in recording the call was “service observing.” Humana may, however, have another chance to make this argument on summary judgment.   

Fourth, Humana argued that a statutory exception for radio communications should apply because Mr. Perea called Humana using his cell phone. Humana asked the court to take judicial notice that cell phones transmit signals using radio waves. The court wasn’t persuaded, finding in part that the radio exception applies to “a radio” (meaning the device, like the C.B. radio collecting dust in your grandfather’s attic), and not to “telephones that operate on radio frequencies.” 

Finally, Humana argued that Mr. Perea’s call wasn’t “confidential” as a matter of law. As we reported last week, the Ninth Circuit just held that confidentiality is measured by an objective standard, and that courts can consider the nature of the defendant’s business and the character of the call to determine if the plaintiff could reasonably expect that the call would not be overheard or recorded. Applying that standard, the Ninth Circuit held that calls about mere billing disputes ordinarily are not confidential.  But here, because Humana was in a line of business that often deals with sensitive medical information, because Humana provided assurances that “it respects the privacy of its customers,” and because Mr. Perea alleged he called to discuss “a very private and highly sensitive medical condition related to erectile dysfunction,” the court found Mr. Perea had stated a plausible claim.

One might find it ironic that Mr. Perea announced his erectile dysfunction to the world in a public court filing that seeks money because of an alleged invasion of his privacy. In any event, although federal courts have shown skepticism of such lawsuits in recent months (there are currently several pending in California), plaintiffs now have a model for a complaint that stands a chance of surviving a motion to dismiss. On the other hand, if Humana can prove on summary judgment that it did play a recorded disclaimer, then it may obtain a ruling in its favor. 

- Zack Allen

Purported Fresh Orange Juice Class Action Won’t Squeeze Defendant

A federal court in Alabama recently dismissed a putative class action challenging the labeling of Florida’s Natural Orange Juice as “100% orange juice,” “fresh,” and “pure,” when the product had allegedly undergone processing and contained added flavors and aromas.  The plaintiff asserted claims for breach of contract and breach of express warranty. This case is one of several similar cases brought against orange juice manufacturers in recent years, including at least two other cases brought by the same plaintiff that are pending in the Northern District of Alabama.  Veal v. Winn Dixie Stores, Inc.; Veal v. Wal Mart Stores, Inc.

In granting the motion to dismiss, the court held that the named plaintiff lacked standing because he had not suffered an actual injury by purchasing the Florida’s Natural Orange Juice. The court doubted the plaintiff’s assertions that he believed the juice to be fresh squeezed, stating that “[a]s a matter of common sense, whatever is in a container on a store shelf with an expiration date some weeks hence cannot contain ‘fresh’ anything.” The court went on to state that even if the plaintiff “believed defendant hired individuals to hand squeeze oranges one by one into juice cartons,” learning that the orange juice was commercially produced did not amount to an injury. According to the court, the plaintiff simply did not allege any harm when he purchased and received the exact product, packaged orange juice, that he intended to purchase. 

The court also rejected the plaintiff’s argument that his injury arose when he allegedly did not receive the benefit of the bargain. Put simply, the court stated “[h]e paid for orange juice mass produced and supplied to grocery stores all over the country, and that is exactly what he received.”  

After finding that the plaintiff had failed to allege any injury, the court went on to note that there were no remedies to redress the plaintiff’s grievances and injunctive relief was improper. Finally, although unnecessary to its holding, the court noted that Florida Natural Orange Juice was properly labeled under FDA standards, suggesting that the plaintiff could not suffer injury by purchasing a product that had been labeled in accordance with those standards.

The court denied the plaintiff’s motion to amend the complaint because there was “nothing in the labeling of Florida Natural Orange juice that would in any way deceive a reasonable consumer into believing that the orange juice in question is anything but pasteurized orange juice.” 

Offering insight into the apparent motive of many food-related consumer class actions, the court also noted that it viewed plaintiff counsel’s actions as “shopping for plaintiffs in an attempt to manufacture a claim,” which the court would not countenance. 

The court’s opinion was a refreshing win for the juice maker, in what has become a hostile climate of food-and-beverage related consumer class actions.  However, the reach of the holding in this case may be somewhat limited, as the plaintiff did not assert a false advertising or misrepresentation claim, which are often at the core of these cases.  

- Ginamarie Caya and Jack Koenig

“This Call May Be Recorded” - Ninth Circuit Says Disclaimer Not Always Necessary. But It’s Still A Good Idea!

John Faulkner called ADT Home Security Services to complain about his bill. He heard a funny “beeping” sound, and when he asked about it, he learned his call was recorded. So he sued ADT, alleging the call was recorded without his consent.  Faulkner brought his class action in California state court, but ADT removed it to federal court, and then persuaded the judge to dismiss it -- with prejudice. 

California is one of a small handful of states that require all parties to a confidential communication to give their consent before it can be recorded.  Whether a call is “confidential” under the applicable penal code (yes, penal code) provisions is measured objectively: the test is whether Faulkner had an “objectively reasonable expectation that his telephone conversation” would not be “overheard or recorded.”  

On January 17, the Ninth Circuit agreed with the well-reasoned opinion of Judge Jeffrey White of the US District Court for the Northern District of California: one can look to the “surrounding circumstances” to determine whether such an objectively reasonable expectation exists, and those circumstances can include the nature of the defendant’s business and even the character of the call.

Faulkner had alleged only that he called to “dispute a charge.”  The rest of his Complaint was formulaic babble. Both Judge White and the Ninth Circuit said that’s not enough. Both courts found Faulkner’s allegation to be “merely consistent” with a confidential communication, but under Federal pleading standards as articulated by the US Supreme Court in Ashcroft v. Iqbal, it wasn’t enough to nudge Faulkner’s claim “from conceivable to plausible.”

This is good news for companies that perform service monitoring, but that don’t inform California callers in advance that their call may be recorded. But the story may not be over for ADT. Although the District Court dismissed the case with prejudice, the Ninth Circuit decided to give Faulkner one more chance in what it conceded was “an abundance -- perhaps an overabundance -- of caution.” 

Companies that record calls should be similarly cautious: avoid a lawsuit altogether by informing every caller that their call may be recorded.

- Zack Allen

Apple’s False Advertising Claim Fails for Lack of a False Statement

On January 2, 2013, the US District Court for the Northern District of California granted partial summary judgment in favor of Amazon on a false advertising claim brought by Apple, which argued that Amazon’s use of the word “Appstore” falsely implies an association with Apple’s App Store. 

In the lawsuit, Apple claims that Amazon’s use of “Appstore” as the name of its online store, where consumers can purchase applications for use on Android and Kindle devices, infringes and dilutes Apple’s alleged trademark rights in “APP STORE.” Amazon argues that “app store” is generic in the same way that phrases such as “camera store” or “grocery store” are generic. Amazon also contends that there is no likelihood of confusion because consumers understand that in order to purchase apps for their Apple devices, they must go to Apple’s App Store. While Apple owns trademark registrations for APP STORE in several countries internationally, Microsoft challenged Apple’s application to register the mark in the United States. That dispute is the subject of a proceeding before the Trademark Trial and Appeal Board and has been stayed pending the outcome of the litigation between Apple and Amazon.

In addition to its trademark claims, Apple claimed that Amazon’s use of “Appstore” reached beyond simply trademark infringement and dilution; Apple contended that the use of the term “Appstore” constituted false advertising.

In granting summary judgment on the false advertising claim, the court focused on “whether Amazon made a false statement of fact in a commercial advertisement about its own or another’s product.” Apple did not argue that Amazon had made an affirmative false statement about “the nature, characteristics, or quality” of Amazon’s Appstore. Instead Apple contended that Amazon’s use of the word “Appstore” falsely implied an association with Apple and deceived consumers by making them think that Amazon’s Appstore would share the same characteristics as, and offer as many applications as, Apple’s App Store.The court explained in its opinion that while an express or explicit statement of fact is not required to state a claim for false advertising, “if an advertisement is not false on its face… the plaintiff must produce evidence, usually in the form of market research or consumer surveys, showing exactly what message was conveyed that was sufficient to constitute false advertising.”  The  court found that Apple had offered no evidence that consumers had an expectation that the Amazon Appstore would have specific qualities or characteristics of the Apple APP STORE, “particularly given that Apple APP STORE sells apps solely for Apple devices, while the Amazon Appstore sells apps solely for Android and Kindle devices.”

Apple’s other claims for trademark infringement, false designation or origin, false description, dilution, and unfair competition remain to be decided in the case.

- Amie Medley

Malicious Prosecution Action Permitted to Proceed Against Plaintiff’s Counsel in Dismissed Consumer Class Action

On November 29, 2012, in an unpublished opinion, Innovation Ventures, LLC v. Howard W. Rubinstein et al., the California Court of Appeal affirmed an order by the trial court permitting Innovation Ventures, LLC, the marketer and seller of the drink 5-Hour Energy, to proceed in a malicious prosecution case against plaintiff’s counsel who had brought, and subsequently dismissed, a consumer class action alleging false advertising in connection with the drink.  The Court, however, reversed the trial court’s ruling that a malicious prosecution action could proceed against the named plaintiff. 

In the underlying purported class action, after some initial discovery, and in the face of impending discovery requests and a request for a second deposition session of the named plaintiff, plaintiff moved to voluntarily dismiss the case. Innovation brought an action for malicious prosecution, and plaintiff and her attorneys responded with a motion under California’s anti-strategic lawsuit against public participation (SLAPP) statute, enacted to prevent lawsuits that target free speech. The California Court of Appeal affirmed the trial court’s denial of the motion as to the attorneys (but reversed as to plaintiff), and concluded that Innovation had established a prima facie case for malicious prosecution. 

Interestingly, the Court relied heavily on the decision by plaintiff’s counsel to continue to prosecute the case even after plaintiff made concessions at deposition and in written discovery responses that she did not suffer any physical or personal injury, that she bought the product “for the case” so she could have a receipt to sue Innovation, and that she voluntarily went back and bought more of the product even after she knew that the effect of the product would not last a full five hours.  The Court also pointed to the fact that in pre-suit conversations plaintiff’s counsel had contacted defense counsel offering to sell “protection.”  Plaintiff’s counsel argued that despite these discovery concessions, all plaintiff had to show, under the California Supreme Court’s decision in Kwikset Corp. v. Superior Court, was that the packaging was likely to deceive a reasonable consumer and actual injury.  But the court noted that “Kwikset held [a] consumer who relies on a product label and challenges a misrepresentation contained therein can satisfy the standing requirement . . . by alleging . . . she would not have bought the product but for the misrepresentation.” (quotations omitted).  And thus plaintiff’s admission that she bought the product for the purpose of suing negated her claim, citing Buckland v. Threshold.  

While the decision is unpublished, it provides a warning bell to plaintiff’s attorneys that may bring or continue to prosecute consumer class actions that have tenuous legal support. Moreover, it emphasizes the importance of obtaining discovery from named plaintiffs in consumer class actions on the issue of the timing and reasons for their product purchases. 

- Rachel Chanin

US v. Google Settlement Adds A Twist to Settlements Without Admission of Liability

Just a month ago, we pondered here whether the requirements imposed by the Circa Direct court “set a higher standard for showing that settlements with federal agencies are in the public interest where defendants have not admitted liability.”  Based on a settlement approved earlier this month between the FTC and Google, Inc., the initial answer to that question appears to “no” -- at least not in the Ninth Circuit.

On November 16, 2012, a California federal judge approved a settlement between Google and the FTC in a lawsuit involving allegations that Google improperly placed cookies on users’ computers without their knowledge, in violation of a 2011 consent order with the FTC. According to the terms of the settlement, Google will pay civil penalties of $22.5 million and let  the cookies it had placed “expire”. The settlement approved by the Commission contains -- over strong objections from FTC Commissioner Rosch and the nonprofit consumer advocacy group Consumer Watchdog -- an express denial by Google that it violated the 2011 order.

Commissioner Rosch’s dissenting statement argued that a settlement is not in the public interest when it “contains a denial of liability.” Commissioner Rosch noted that the federal court in Circa Direct at least ordered the FTC to explain why the consent decree was in the public interest where liability was denied, but that no such explanation was provided here. 

The California court appeared cautious of approving a settlement where Google denied wrongdoing, permitting Consumer Watchdog to file an amicus curiae brief laying out its objections to the settlement.  Consumer Watchdog argued that “the Commission has taken the rare if not extraordinary step of permitting Google to deny liability expressly in the proposed order.” While recognizing that the FTC Rules of Practice allow settlement agreements to contain statements that the agreement “does not constitute an admission by any party that the law has been violated as alleged in the complaint,” Consumer Watchdog argued that the rules do not permit a party to deny any and all liability in a stipulated order settling litigation between the parties.

Despite these objections, the court ultimately approved the settlement, noting that in Circa Direct the court ultimately approved the consent decree without an admission of liability. In addressing Consumer Watchdog’s argument that the legal standard for approving regulatory settlements (under Circa Direct) must include consideration of whether the settlement promotes the public’s interest, the court stated that “the Second Circuit’s law on the public interest prong is still in flux, and is currently not as broad as envisioned by the Circa Direct court” (citing SEC v. Citigroup Global Markets Inc.). 

Moreover, the court held that the Circa Direct court based its reasoning on a public interest inquiry that the Ninth Circuit does not follow. The court explained that the Ninth Circuit has held that even if a federal agency is required to serve the public interest, a district court should defer to an agency’s decision that the settlement is appropriate, provided that the court has ensured the proposed settlement is reasonable (citing SEC v. Randolph). 

Outside of the Ninth Circuit, of course, the impact of Circa Direct -- and now US v. Google -- remains to be seen.

- Carolyn Pearce and Roberta Horton

Can I Get that Pizza for Delivery? Court Certifies Class in Papa John’s Case

On November 9, 2012, the US District Court for the Western District of Washington allowed Papa John’s customers who received text messages advertising Papa John’s pizzas to seek relief in a class action that includes potentially hundreds of thousands of customers. In the lawsuit , named plaintiff Maria Agne claims that certain Papa John’s franchisees provided lists of customers’ phone numbers to a marketing company, OnTime4U. OnTime4U allegedly sent text messages containing Papa John’s advertisements to these customers -- with some customers receiving dozens of messages -- even though no customers consented to receive such messages. Ms. Agne sued not only OnTime4U and the franchisees she believes gave out phone numbers, but also the national Papa John’s franchisor, which she claims directed, encouraged, and authorized the franchisees to use OnTime4U’s services. The lawsuit raises claims under the federal Telephone Consumer Protection Act (TCPA), as well as Washington state law claims, and seeks at least $500 in damages for each violation of the TCPA. 

Papa John’s maintains that Ms. Agne overstates any involvement by Papa John’s in OnTime4U’s advertising campaign. According to Papa John’s, whether a franchisee used OnTime4U was solely the decision of that individual franchisee, and Papa John’s did not and could not require a franchisee to use OnTime4U. Papa John’s also claims that, after receiving complaints from customers about the text messages and concluding that OnTime4U’s text messages might violate the TCPA, Papa John’s promptly disavowed any relationship with OnTime4U and instructed its franchisees to reclaim any information they had provided to OnTime4U or to ask OnTime4U to destroy that information. 

The court’s decision, which certified both a nationwide class and a statewide class, pointed out that Papa John’s had not contracted with OnTime4U, but nevertheless concluded that there was evidence of Papa John’s involvement with the advertising campaign. In particular, the court observed that some employees of Papa John’s encouraged franchisees to use OnTime4U and that OnTime4U made a marketing presentation at a Papa John’s conference attended by its franchisees. The court further concluded that questions regarding Papa John’s relationship with OnTime4U applied equally to all class members and thus supported its decision to proceed as a class action. In addition, the court explained that there was no indication that any customer had consented to receiving text messages from Papa John’s and therefore the question of customer consent did not preclude class certification. Moreover, the court rejected Papa John’s argument that the TCPA requires that each customer have been charged for a text message and Papa John’s argument that Ms. Agne could not recover because her cell phone was in her ex-husband’s name. 

The court’s holding potentially could lead to one of the largest awards ever under the TCPA, which could be hundreds of millions of dollars given the size of the classes, the scope of the advertising campaign, and the availability of $500 per TCPA violation. Before any such award, however, Papa John’s is likely to seek an immediate appeal of the court’s class certification decision. In addition, Papa John’s likely will raise numerous arguments as to why it is not liable for advertisements sent by OnTime4U, including that Papa John’s did not participate in OnTime4U’s campaign and should not be vicariously liable for the acts of its franchisees. 

Whatever the ultimate outcome, the lawsuit and recent decision demonstrate the potential risks for franchisors that are even marginally involved in franchisees’ advertising decisions.  It also shows the potential for large-scale class actions seeking significant damages under the TCPA where parties employ text message advertising aimed at customers that have never provided any consent.  It is unquestionable that this form of advertising can reach a massive number of people in a short amount of time, so franchisors should beware.    

- David Kouba

Federal Court Decision Guides Companies Challenging Actions by the Consumer Product Safety Commission

On October 22, 2012, the US District Court for the District of Maryland released an opinion enjoining the Consumer Product Safety Commission (CPSC) from publicly publishing a report “implicating” a consumer product. The Company Doe v. Tenenbaum decision marks the first time a court has prohibited CPSC from posting a report on CPSC’s SaferProducts.gov website, a database mandated by Congress in the Consumer Product Safety Improvement Act of 2008 (CPSIA). 

The CPSIA requires CPSC to post on its database "reports of harm relating to the use of consumer products” that CPSC receives from consumers or a broad range of other designated parties. The plaintiff-manufacturer in Company Doe asserted that a report CPSC intended to publish was “materially inaccurate” because the report did not “relate to” the use of the manufacturer’s consumer product, as required by the CPSIA. After CPSC rejected the company’s argument, the company brought suit arguing, among other things, that CPSC’s decision was arbitrary and capricious and an abuse of discretion under the Administrative Procedure Act. The court agreed with the company, ruling on cross-motions for summary judgment that CPSC cannot publish a report when the odds of a connection between a product and the harm are no more likely than that of a “coin flip.” The court found that, to be “related” to a product, an event must be “connected with” or “associated with” the product.  And, the court found unconvincing CPSC’s efforts to “establish the necessary nexus” between the report and the product.  

Companies throughout the distribution chain -- manufacturers, importers, retailers and distributors -- whose products are subject to CPSC’s jurisdiction should take note of this decision. Company Doe not only creates a roadmap for challenging CPSC’s decisions to publish reports on the SaferProducts.gov website, but the decision also could provide important support should a company challenge CPSC’s decisions in other contexts as well.  For more information about this decision and its implications, click here.

- Eric Rubel, Matt Eisenstein, and Jason Ross

More Than Just Bed Bugs Keeping FTC Up at Night

The Federal Trade Commission (FTC) is set to litigate its deceptive advertising claims against Springtech, the marketers of Best Yet!, a cedar oil-based solution that claims to eliminate bed bug and head lice infestations. 

On September 5, 2012, the FTC filed deceptive advertising charges against both Springtech 77376, LCC and RMB Group, LLC, makers of bed bug and lice treatments. What makes this case interesting is Springtech’s decision to fight the charges. While RMB Group settled with the FTC, Springtech refused. 

The FTC is making three deceptive advertising claims against Springtech: (i) a lack of substantiation claim, (ii) a false claim of government affiliation, and (iii) a false claim about an EPA recommendation.  The FTC alleges that Springtech lacked adequate support prior to making claims that its cedar oil spray is a “contact killer” of bed bugs and is “far more effective than synthetic chemicals” at stopping and preventing bed bug infestations.  The FTC also intends to pull the sheets over Springtech’s claims that its products are “scientifically tested and proven” to be effective.  According to the FTC, scientific studies do not prove that Springtech’s products are effective.

Springtech also got under the FTC’s skin by making allegedly false claims about its affiliation with the federal government.  (In advertisements, Springtech claimed that its bug spray was “developed at the request of the USDA for our military,” and has been “acknowledged by the USDA as the number one choice of bio-based pesticides.”) One of the FTC’s likely concerns here is that false claims of affiliation may mislead consumers about the product’s quality, reliability, efficacy, or value, by falsely implying that the products have the aura of federal government legitimacy. 

Lastly, the FTC is losing sleep over Springtech’s claim that “the EPA recently warned victims fighting bed bugs to ‘avoid chemical solutions altogether,’” which the FTC maintains is simply not true.  Rather, according to the FTC, the EPA recommends a combination of techniques to fight bed bugs, including prevention, monitoring, and limited use of chemical pesticides.  Although not alleged in the FTC’s complaint, this type of claim could also raise concerns about overstating the safety or environmental benefits of the product.

We will be sure to keep our eyes open to see how this case progresses.  It will be interesting to learn the arguments Springtech makes in support of its claims, and what effect those arguments could have on future substantiation and government affiliation claims.   

- Angel Garganta and Brittany McClure

Update on FTC v. Circa Direct: A Weighty Matter Finally Settled

On October 17, 2012, the US District Court for the District of New Jersey approved a settlement in FTC v. Circa Direct requiring the defendants to pay more than $2 million in assets, and to make clear when their messages are advertisements rather than news articles.  We previously wrote on this issue in an earlier blog, in which we reported that earlier this year, the District Court had declined to approve the parties’ proposed settlement.

In April of 2011, the Federal Trade Commission (FTC) filed a complaint charging Circa Direct and its owner, Andrew Davidson, with running misleading internet advertisements related to products including acai berry-based weight loss products.  According to the FTC, Circa advertised products on websites that looked like news reports, and also bought ad space on legitimate news sites where they worded ads to look like previews of news stories.

In February, the parties agreed to a settlement and submitted a stipulated order for the court’s approval. The order provided for a monetary judgment of $11.5 million and a permanent injunction against the defendants. Notably, however, it contained no admission of wrongdoing by Circa.

The New Jersey District Court declined to enter the order and concluded that it must ensure the settlement is fair. The Court specifically expressed concerns that a settlement without an admission of liability would not serve the public interest. The Court cited SEC v. Citigroup Global Markets, Inc., where the Southern District of New York held that it could not approve a settlement that similarly permitted the defendant to settle without admitting to any of the allegations against it.  The Court ordered the parties to brief the issue of whether the Citigroup standard of review should apply.  The parties agreed that the Citigroup standard, which asks “is the settlement fair, adequate, reasonable and in the public interest,” applied, but argued that a lack of an admission of liability was not relevant to the Court’s review in this case.

Subsequently, the Court ordered the FTC to further brief various issues, including whether a settlement with no admission of liability can be in the public interest.  On September 11, 2012, following submissions by the FTC, the Court issued a conditional approval of the proposed settlement.  To address the public interest, the court ordered the FTC to take steps to inform the public and “allow it to assess the truth of the FTC’s claims” by hosting a webpage discussing the settlement.  In its Order, the SEC noted that the Second Circuit had granted the parties’ request for a stay in Citigroup, finding that they had demonstrated the factors necessary for a stay.

On October 17, 2012, following the parties’ compliance with its earlier Order, the Court approved the settlement.  While the Court’s final order did not ultimately require the FTC to extract an admission of liability from the defendants, it did go further than simply “rubber-stamping” the proposed settlement.  It remains to be seen whether the District Court’s decision will set a higher standard for showing that settlements with federal agencies are in the public interest where defendants have not admitted liability.

- Christina Brenha and Roberta Horton

 

¿Cuidado?: Are Bilingual Warnings Necessary on Consumer Products?

Is a manufacturer or seller of consumer products required to include bilingual warnings with their products? According to a recent 11th Circuit decision, the answer is generally no, absent special circumstances. But US demographics, and consumer products companies’ efforts to adapt to them, are rapidly evolving-- setting up a potential conflict with this seemingly clear rule.

According to the US Census Bureau, 35 million people in the United States speak Spanish at home, with only half of them reporting speaking English “very well.”  Recognizing this significant market, many retailers have launched initiatives to specifically target Spanish speakers through the use of Spanish language websites and social media.  Additionally, both Home Depot and Lowes require all vendors to provide a bilingual label on their products.  This growing trend has led some to argue that manufacturers and retailers should be required to include Spanish language warnings on their products.

The Eleventh Circuit recently rejected this argument, however, holding that English-only warnings on a heater were adequate as a matter of law.  In Farias v. Mr. Heater, Inc., a Spanish-speaking plaintiff sued Home Depot and the manufacturer of a heater she purchased there for injuries she suffered after two propane heaters exploded inside her home.  She claimed that the defendants had a duty to warn of the dangers of the heater in both English and Spanish.  The Eleventh Circuit, however, disagreed and affirmed the trial court’s grant of summary judgment for the defense.  The court rejected the plaintiff’s argument that Home Depot’s internal policy requiring vendors to use bilingual packaging gave rise to a duty to warn in Spanish, and noted that there was no evidence of any specific targeting of Spanish-speaking customers for the product at issue. 

Farias is consistent with the California Supreme Court’s 1993 holding in Ramirez v. Plough that a drug manufacturer need not provide Spanish warnings because both the US Food & Drug Administration and the State of California had prescribed specific English warnings. In reaching this decision, the court noted several instances in which California law requires a non-English warning. The court reasoned that legislative bodies can require such warnings on products if they believe they are appropriate. Although such requirements remain rare, they can exist at all levels of government. For example, the San Francisco Board of Supervisors has required trilingual (English, Spanish and Chinese) warnings in restaurants that choose to provide California Proposition 65 warnings concerning chemicals that may be present in food and beverages.

Farias and Ramirez, however, are not the only word on bilingual warnings. The First Circuit long ago required bilingual (or at least pictorial) warnings when manufacturers of dangerous products know they will be used by non-English speaking customers. And even the courts in Farias and Ramirez recognized that manufacturers could potentially be required to provide Spanish warnings if the plaintiff establishes a history of targeted marketing of the product to non-English speaking consumers. These caveats to the general rule that bilingual product warnings are not required will likely increase in importance as companies continue to adapt to changing demographic patterns.

Retailers and manufacturers should carefully consider whether to include bilingual warnings on their products.  This analysis should take into account a variety of factors, including marketing efforts to non-English speaking consumers, the available space on labels and other written material, and even the possibility of confusion that may arise.  This is an issue that will only continue to raise questions in our increasingly bilingual and even multilingual society.

- Trent Norris and Nicholas Kennedy

Upcoming Event: Anatomy of a Data Breach: Proactively Establishing a Plan to Navigate the Complexities of Cyber Attacks and Mitigate Their Potential Liabilities

The editors of the Consumer Advertising Law Blog wanted to let our readers know about an upcoming event that may be of interest to you entitled, "Anatomy of a Data Breach: Proactively Establishing a Plan to Navigate the Complexities and Mitigate Potential Liabilities of Cyber Attacks ". [Full disclosure: Our firm, Arnold & Porter LLP, is sponsoring the event]

Earlier this year, after a data breach incident, the CEO of a well-known on-line retailer remarked, "We've spent over 12 years building our reputation, brand, and trust with our customers. It's painful to see us take so many steps back due to a single incident.” Being prepared for a data breach can prove crucial to a company's operations, its reputation, and even its survival. Using real world examples from recent cases, this event will walk attendees through the proactive steps companies can take in anticipation of a breach to avoid complex challenges and protracted, costly litigation.

Panelists at the event will include: 

• Aisha Christian, Associate General Counsel, Russell Reynolds Associates (former Senior Counsel at CNBC, Inc.)
• Marcus Asner, Partner, Arnold & Porter LLP
• Ken Chernof, Partner, Arnold & Porter LLP
• Susan Shin, Partner, Arnold & Porter LLP

CLE credit is pending.

The event will take place in New York City (399 Park Avenue) from 9:00 AM to 10:00 AM EDT on September 18, 2012. For more information or to RSVP, please click here.