RIP “White” Chocolate Litigation (2012-2020)

By: Alexander M. Smith 

White chocolateWhile some varieties of food labeling lawsuits (such as lawsuits challenging the labeling of “natural” products) show no sign of dying off, other trends in food labeling litigation have come and gone. Last year, for example, appeared to mark the end of lawsuits challenging the labeling of zero-calorie beverages as “diet” sodas. And this year may witness the end — or, at least, the beginning of the end — of lawsuits challenging the labeling of “white” candy that is not technically “white chocolate,” at least as the FDA defines that term.

Although it is difficult to pinpoint the beginning of “white” chocolate litigation, the leading case for many years was Miller v. Ghirardelli Chocolate Co., 912 F. Supp. 2d 861, 864 (N.D. Cal. 2012). There, the court declined to dismiss a lawsuit challenging the labeling of Ghirardelli’s “Classic White” baking chips. The court concluded that the plaintiff had plausibly alleged that a variety of statements on the packaging — including “Classic White,” “Premium,” “Luxuriously Smooth and Creamy,” “Melt-in-Your-Mouth-Bliss,” and “Finest Grind for Smoothest Texture and Easiest Melting” — collectively misled the plaintiff into believing that the product was made with “real” white chocolate, even though it was not. Id. at 873-74. Emboldened by this decision, plaintiffs in California, New York, and elsewhere began filing a wave of similar class actions challenging the labeling of “white” chocolate, baking chips, and other candy. Since the beginning of this year, however, courts have begun dismissing “white” chocolate lawsuits with increasing frequency.

In Cheslow v. Ghirardelli Chocolate Co., for example, the plaintiffs — like the plaintiffs in Miller — challenged the labeling of Ghirardelli Classic White Premium Baking Chips as misleading. --- F. Supp. 3d ---, 19-7467, 2020 WL 1701840, at *1 (N.D. Cal. Apr. 8, 2020). Although the plaintiffs alleged that the product’s labeling misled them into believing that the product contained white chocolate, the court found this theory of deception implausible and dismissed the complaint. In reaching that conclusion, the court noted that the labeling did not include the terms “chocolate” or “cocoa” and that the term “white” referred to the color of the chips, rather than the presence of white chocolate or the quality of the chips. Id. at *4-5. Much as the term “white wine . . . does not inform the consumer whether the wine is a zinfandel or gewürztraminer,” the court reasoned that the adjective “white” was not probative of whether the chips contained white chocolate. Id. at *5. Likewise, even if some consumers might misunderstand the term “white” to refer to white chocolate, the court concluded that this would not salvage the plaintiffs’ claims; according to the court, the fact that “some consumers unreasonably assumed that ‘white’ in the term ‘white chips’ meant white chocolate chips does not make it so.”  The court also rejected the plaintiffs’ remaining theories of deception: it concluded that the term “premium” was non-actionable puffery (id. at *5-6); it held that the image of white chocolate chip macadamia cookies on the package did not “convey a specific message about the quality of those chips” (id. at *7); and it held that consumers could not ignore the ingredients list, which made clear that the product did not include white chocolate and resolved any ambiguity about its ingredients (id. at *7-8). And while the plaintiffs attempted to amend their complaint to bolster their theory of deception, the court concluded that their new allegations — including a summary of a survey regarding consumer perceptions of the labeling — did not render their theory any more plausible and dismissed their lawsuit with prejudice. See Cheslow v. Ghirardelli Chocolate Co., --- F. Supp. 3d ----, 2020 WL 4039365, at *5-7 (N.D. Cal. July 17, 2020).

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SEC and CFTC Actions Against Cryptocurrency App Developer for Unregistered Security-Based Swaps Highlight Risks for Fintech Companies

By: Charles D. Riely and Michael F. Linden

FintechA recent enforcement action by the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) in the Fintech space serves as a cautionary tale for innovators who fail to heed traditional regulations. On July 13, 2020, the SEC and CFTC each filed settled enforcement actions against California-based cryptocurrency app developer Abra and its related company, Plutus Technologies Philippines Corporation. Abra’s bold idea was to provide its global users with a way to invest in blue-chip American securities, all funded via Bitcoin. In executing this idea, Abra took pains to focus its products outside of the United States and hoped to avoid the ambit of US securities laws. As further detailed below, however, the SEC and CFTC both found that Abra’s new product violated US laws. This post details Abra’s product, why the regulators came to the view that the new idea ran afoul of long-established provisions under federal securities and commodities laws, and the key takeaways from the regulators’ actions.

  1. Abra’s Product

In 2018, Abra began offering users synthetic exposure, via Bitcoin, to dozens of different fiat currencies and a variety of digital currencies, like Ethereum and Litecoin. Users could fund their accounts with a credit card or bank account, and Abra would convert those funds into Bitcoin. When a user wanted exposure to a new currency, the user would choose the amount of Bitcoin he or she wanted to invest, Abra would create a “smart contract” on the blockchain memorializing the terms of the contract, and the value of the contract would move up or down in direct relation to the price of the reference currency.

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OCC Adopts Final Rule Rejecting Madden

By: Michael W. Ross, Williams S.C. Goldstein, Amy Egerton-Wiley and Maria E. LaBella

LoanLast month, the Office of the Comptroller of the Currency’s (OCC) adopted a final rule clarifying that the terms of a national bank’s loans remain valid even after such loans are sold or transferred.  The rule was intended to reject the Second Circuit’s decision in Madden v. Midland Funding 786 F.3d 246 (2015).  The Federal Deposit Insurance Corporation (“FDIC”) followed suit later in the month, adopting a rule to clarify that interest rates on state bank-originated loans are not affected when the bank assigns the loan to a nonbank.  These steps do not resolve all of the uncertainty surrounding the decision, as discussed further below.

  1. The Madden v. Midland Funding

In Madden v. Midland Funding, Saliha Madden, a New York resident, contracted with Bank of America for a credit card with a 27% interest rate.  That rate exceeded the 25% usury cap under New York law.  But, as a national bank, Bank of America believed that it was entitled to “export” the interest rate of Delaware, its place of incorporation, under the National Bank Act and attendant principles of federal preemption.  By the time Madden defaulted, the balance had been acquired by Midland Funding, a debt collector headquartered in California.  When Midland Funding tried to collect the debt at the 27% interest rate, Madden sued under New York usury laws.  She argued that Midland could not take advantage of Bank of America’s interest-rate exportation.

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Update on the PPP Litigation Landscape

By: Michael W. Ross and Jacob D. Alderdice

COVID19The implementation of the Paycheck Protection Program (PPP) under Title I of the Coronavirus Aid, Relief and Economic Security Act (the CARES Act) amidst the COVID-19 economic downturn has spawned a growing cottage industry of litigation, including several waves of cases against different defendants—primarily bank and non-bank lenders, and the United States Small Business Administration (SBA).  The nature of the cases has varied.  In the first cases filed, borrowers excluded from PPP sued banks for imposing additional restrictions on their applications, and for prioritizing bigger, institutional clients.  The second wave of lawsuits saw different categories of borrowers, such as companies owned by borrowers with criminal records, companies in bankruptcy, and others, suing the SBA for excluding them from the program entirely.  Finally, the latest round of cases involve financial services firms, accountants, and other borrowers’ agents initiating class actions against lenders for the failure to pay agent fees to those parties.  These three “waves” encompass the bulk of PPP litigation to date, but there have been some lawsuits of other varieties as well, including at least one civil enforcement action by the Federal Trade Commission alleging unfair and deceptive practices.[1]

In a prior update, we described one of the first court rulings in the PPP cases, in which on April 13, a federal district court in Maryland denied relief to a borrower who had sued Bank of America for imposing its own eligibility requirements on PPP borrowers.  See Profiles, Inc. v. Bank of Am. Corp., No. CV SAG-20-0894, 2020 WL 1849710, at *1 (D. Md. Apr. 13, 2020).  The court held that the CARES Act did not authorize a private right of action for borrowers to sue private lenders, and that the Act permitted banks to impose their own lending restrictions.  Soon after, a California federal court denied relief in a similar suit, denying a temporary restraining order for borrowers alleging that JPMorgan Chase and other large banks improperly accepted PPP applications from only existing customers.  Legendary Transp., LLC v. JPMorgan Chase & Co., No. 220CV03636ODWGJSX, 2020 WL 1975366, at *2 (C.D. Cal. Apr. 24, 2020).  Although no court has yet ruled in favor of borrowers in this type of lawsuit, similar lawsuits have continued to be filed and remain pending, alleging violations of state laws.[2]

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Ready for Launch (Redux)? An Updated Analysis of the Federal Reserve’s Rapidly Changing Main Street Lending Facilities


By: Neil M. Barofsky, Michael W. Ross and Ali M. Arain

COVID19On June 8, 2020—shortly after announcing the program was set to launch—the Board of Governors of the Federal Reserve (Federal Reserve) announced material changes to some of the key terms for the “Main Street” lending program.[1]  As of June 15, 2020, months after it was first announced, the program is finally operational.

As described in our prior alert, the Main Street lending program will provide up to $600 billion in loans to small- and medium-sized businesses in order to ease the economic dislocation caused by the COVID-19 pandemic.  Federal Reserve Chair Jerome H. Powell has underscored in several recent remarks that one key goal of the program is to ensure companies can continue to support the country’s workforce.  

Since the initial roll out of the program, the Federal Reserve has continued to announce changes, new details, and clarifying FAQs, that provide important guidance to potential participants.  These include significant changes made to the program on May 27, 2020, and then again on June 8, 2020, on the eve of the program’s launch.  Understanding the changes and clarifications to the program since its launch will be crucial for companies considering submitting an application for funds.

This client alert builds on our prior alert and provides a summary of the key features of the Main Street program, highlighting changes since its initial announcement and how those changes may affect the businesses that are considering seeking relief through this program.  We encourage you to follow up with any questions or concerns.  Jenner & Block offers a wide array of resources and lawyers with experience necessary to help our clients navigate the implications of these important new programs, led by our COVID-19 Response Team.  The firm is well positioned to help our clients manage the challenging issues related to the current crisis, from applications for funds, to managing workforce concerns, to the Congressional oversight and government investigations that may accompany any such financial assistance.

To read the full alert, please click here.

Additional Contributors: Marc B. Hankin, Anna Meresidis, Edward L. Prokop, Jacob D. Alderdice and William R. Erlain

Mitigating COVID-19’s Additional Disparate Impacts - Fair Housing and Lending Obligations Under the CARES Act

By: Kali N. Bracey and Damon Y. Smith

COVID19As data began pouring in from cities and states hit hard by COVID-19 it became clear that, even though the virus is color blind, certain racial and ethnic communities were suffering a disproportionate impact from the disease.  See, e.g., last visited on May 5, 2020.  In particular, African Americans who contract COVID-19 have higher death rates, caused by underlying conditions and lack of access to health care.  Id.  Similarly, women- and minority-owned businesses may be disproportionately impacted by this crisis due to preexisting economic conditions such as lack of access to credit.  See, e.g.,, last visited on May 5, 2020.

When Congress passed the CARES Act to provide desperately needed funds to impacted industries, they waived statutory and regulatory requirements that could delay the delivery of that aid.  However, in recognition of the disparate conditions described above, Congress did not provide waivers of the Fair Housing Act, 42 U.S.C. § 3602 et. seq. and the Equal Credit Opportunity Act, 15 U.S.C. § 1691 et. seq.

The Fair Housing Act (FHA) prohibits discrimination in the sale or rental of housing because of race, color, national origin, religion, sex, familial status and disability.  With very few exceptions, homebuyers, homeowners, renters and prospective renters are protected from discrimination based on these classifications in all aspects of the financing and provision of housing.  The FHA prohibits both intentional discrimination and policies and decisions that are not intentionally discriminatory, but have a disproportionate and adverse impact against a protected class.  If a plaintiff is able to show that the disproportionate adverse impact exists, the burden shifts to the defendant to prove that there is a legitimate, non-discriminatory business need for the policy or decision.

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Proposed Amendments to Prop 65 Regulations May Force Changes to E-Commerce Warnings

By:  Kate T. Spelman and Amy Egerton-Wiley

Proposition 65 warnings are familiar to any business that manufactures, distributes, or supplies consumer products for sale in California. Enacted through a ballot initiative in 1986 as “the Safe Drinking Water and Toxic Enforcement Act,” Proposition 65 requires businesses to provide “clear and reasonable” warnings to consumers regarding exposure to certain carcinogenic and/or toxic chemicals identified by the California EPA’s Office of Environmental Health Hazard Assessment (OEHHA). image from

Recent amendments—and proposed amendments—to the Proposition 65 warning regulations purportedly seek to clarify ambiguities related to the who, what, where, and when of providing safe harbor warnings under the law. With respect to internet purchases, however, the proposed amendments arguably go farther than simply clarifying the existing law, requiring e-commerce businesses to provide multiple warnings not required of brick-and-mortar retailers.

I. Recent Amendments Addressing Responsibility for Proposition 65 Warnings

OEHHA’s most recent amendments to the Proposition 65 warning regulations became effective on April 1, 2020. These amendments clarify the roles of upstream sellers and retail sellers in providing Proposition 65 warnings to consumers.

The warning regulations previously provided that upstream sellers (including manufacturers, distributors, and importers) could satisfy the Proposition 65 warning requirement with either an on-label warning, “or by providing a written notice directly to the authorized agent for a retail seller.” This “written notice” provision created confusion for upstream businesses involved in complicated supply chains or otherwise without knowledge of the final retail seller of the product at issue. The April 2020 amendments helpfully clarify that upstream sellers are only required to provide Proposition 65 notices to their direct customers, which in some cases may be other manufacturers or distributors as opposed to retailers. The April 2020 amendments also clarify that an upstream seller may deliver such notice to its customer’s “legal agent” if that customer has not selected an “authorized agent” for purposes of Proposition 65.

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Early CARES Act Ruling Recognizes Broad Discretion for Participating Lenders

By: Michael Ross and Jake Alderdice

On April 13, 2020, a federal district court in Maryland issued one of the first rulings to interpret the provisions of Congress’s Coronavirus Aid, Relief and Economic Security Act (the CARES Act), signed into law by President Trump on March 27, 2020.  At issue before the Court was whether Bank of America could be prevented from adding eligibility restrictions, beyond those in the Act, on small businesses applying for forgivable loans under the CARES Act’s $349 billion Paycheck Protection Program (PPP).  In denying relief to the prospective borrower, the district court found that the bank could impose additional eligibility criteria and that private parties were powerless to bring private actions to enforce the terms of the program.  Although just one data point, the early ruling may signal that courts will give lenders latitude in how they are carrying out CARES Act programs.

Background image from

Title I of the CARES Act established the Paycheck Protection Program (PPP), which provided for $349 billion in loans to small businesses.  These loans become fully forgivable if the businesses use them for certain purposes, such as maintaining their payroll.  Demand for the emergency loans quickly ate up the funding, with the entire $349 billion fund depleted by April 16, 2020, based on 1.4 million approved applications. Congress is currently debating providing additional funding for the program.

The CARES Act set out eligibility requirements for PPP borrowers, including, among others, that the businesses, with some exceptions, need to have fewer than 500 employees.  Following the program’s launch, news reports indicated that lenders were imposing additional requirements on potential borrowers, particularly to ensure borrowers had certain preexisting relationships with the lender.  In the case of Bank of America (BofA), early reports claimed that the bank required applicants to have both a preexisting deposit account and a lending account in order to apply for a PPP loan.  BofA later changed that requirement so that it only required a deposit account with the bank, and that the applicant not have a lending relationship elsewhere. BofA included simply having a credit card with another bank as a “lending relationship.”

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Regulatory Alert: An Analysis of the Federal Reserve’s New and Expanded Programs to Support the US Economy

On April 9, 2020, the Board of Governors of the Federal Reserve (Federal Reserve) announced an array of new and expanded programs designed to ease the economic dislocation caused by the COVID-19 pandemic. Together, these programs will provide up to $2.3 trillion in funding to support the flow of credit to US businesses of all sizes, individual households, and state and local governments. Although these programs in many ways mirror those established by the Federal Reserve after the 2008 financial crisis, there are some significant expansions and differences as well. Noun_virus_1772453

The support programs include:

  • a new “Main Street” lending program that will provide up to $600 billion in loans to small- and medium-sized businesses;
  • expanded corporate credit programs that will provide up to $750 billion to purchase corporate debt on the primary and secondary markets, including, in a significant departure for the Federal Reserve, debt that is rated below investment grade;
  • a groundbreaking new program that will provide up to $500 billion in lending to state and local governments;
  • up to $100 billion in loans for borrowers who pledge certain highly rated asset-backed securities (ABS), which will support consumer and other types of lending; and
  • a new lending facility that will provide up to $350 billion in financing to banks to help them meet the overwhelming demand by small businesses for the Paycheck Protection Loans created by the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act).

To read the full article, click here.

New York’s SHIELD Act in Full Force

By: Tracey Lattimer

ShieldOn July 25, 2019, New York Governor Andrew Cuomo signed into law the Stop Hacks and Improve Electronic Data Security (SHIELD) Act, which updates New York’s data breach notification law (as set out in the New York General Business Law and New York State Technology Law) and implements new data security requirements.  On March 21, 2020, the SHIELD Act came into full effect.

The most significant changes introduced by the SHIELD Act include:

  • The types of information that may trigger the data breach notification requirements have been expanded to include: (i) in combination with a personal identifier, an account number, credit or debit card number if such number could be used to access an individual’s financial account without additional identifying information, security code, access code or password; (ii) in combination with a personal identifier, biometric information; and (iii) a user name or email address in combination with a password or security question and answer that would permit access to an online account.  (See definition of “private information” within the Act.)
  • The Act introduces new data security requirements.  Any person or business that owns or licenses computerized data that includes private information of a New York resident must now develop, implement and maintain “reasonable safeguards to protect the security, confidentiality and integrity of the private information.”  The Act also sets out “reasonable” administrative, technical and physical safeguards that should be included in a compliant data security program.

The amendments to the data breach notification requirements came into force on October 23, 2019.  The new data security requirements came into force on March 21, 2020.

Under the Act, violations of the data breach notification requirements can attract a civil penalty of the greater of $5,000 or up to $20 per instance of failed notification, provided the latter amount shall not exceed $250,000 (an increase from the cap of $150,000 under the old law).  Similarly, violations of the data security requirements can attract a civil penalty of not more than $5,000 per violation (as set out in § 350-D of the New York General Business Law).

In order to comply with the SHIELD Act, companies throughout the United States that process information relating to New York residents should review the information they collect and consider whether they need to update their data protection and breach notification policies and procedures.  Such companies should also implement appropriate data security programs and safeguards as detailed in the Act.