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February 2016

German Data Protection Authorities Start to Bring Enforcement Actions on Safe Harbor

By Mary Ellen Callahan

Last week, the Hamburg Data Protection Commissioner Johannes Caspar announced three enforcement actions against (unnamed) subsidiaries of U.S. companies for non-compliance with valid data transfer mechanisms. After the Schrems decision in the European Court of Justice in October 2015 that invalidated US-EU Safe Harbor as a valid data transfer mechanism from the EU to the U.S., the EU Data Protection Authorities (DPA) (through the Article 29 Working Party) announced a grace period to allow companies to get into compliance with other data transfer mechanisms (Model Contracts, Binding Corporate Rules). This grace period has ended and the Privacy Shield announcement did not change this fact.

The Hamburg enforcement actions are the first enforcement actions against U.S. companies that did not update their data transfer compliance, but they certainly will not be the last. Companies should anticipate enforcement actions for non-compliance from other DPAs. In fact, it is likely that there are other data protection enforcement actions that have not yet been announced. Spain, France, and other German state-level DPAs have been particularly vocal about investigating data transfer non compliance. There has been some concern among DPAs that they might lose their credibility if there was no enforcement after all the public statements and grace period.

Although the targeted companies were not named in the Hamburg decisions, it is expected that there had been several exchanges between the companies and Commissioner Caspar prior to the decision to bring enforcement actions.

Thanks to visiting attorney Stefan Alich for his contributions to this post.

9th Circuit Court of Appeals Revives “Natural” Cosmetics Class Action Against Hain Celestial Group

Tree_iStock_000004633733LargeBy Jeremy M. Creelan

On February 22, 2016, the Court of Appeals for the 9th Circuit revived a putative class action brought by named plaintiffs Alessandra Balser and Ruth Kresha on behalf of consumers against The Hain Celestial Group, Inc. The plaintiffs alleged in their complaint that Hain’s use of the word “natural” and “100% vegetarian” on its products’ packaging is misleading and deceptive under California’s consumer protection law because the products contain synthetic ingredients.

Judge Real of the Central District of California dismissed the complaint without leave to amend in a brief opinion in 2013.  Finding that “it is undisputed that ‘natural’ is a vague and ambiguous term,” the District Court rejected as implausible the plaintiffs’ definition of that term as “existing in or produced by nature; not artificial.” In particular, the Court found that “shampoos and lotions do not exist in nature, there are no shampoo trees, cosmetics are manufactured.”  Citing Hain’s clarifications on its product labels and website, the Court further found that the company’s uses of the term “100% vegetarian” to mean “without animal products” and without “parabens, sulfates, or phthalates” were sufficiently clear that no reasonable consumer could be deceived.

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Arbitration Is Compelled Even Though The Designated Forum Is Non-Existent

New-Development-IconBy Howard S. Suskin

A district court granted defendant’s motion to compel arbitration even though the arbitration forum specified in the parties’ arbitration agreement does not exist.  PR Group, LLC Windmill International LTD., No. 14-0401-CV-W-BP (W.D. Mo. Feb. 1, 2016).   The court concluded that the failure to properly specify an arbitration forum does not render the agreement to arbitrate ineffective.  Section 5 of the Federal Arbitration Act, which permits the court to designate an arbitrator when there is a lapse in the parties’ agreement for naming an arbitrator, applies when the arbitration forum ceases to exist as well as when one has not been designated.  Accordingly, the court exercised its power to direct that arbitration be conducted by the American Arbitration Association.    

Whole Foods Escapes Yogurt Sugar Content MDL

IStock_000015598991LargeBy Alexander M. Smith

On February 16, Judge Sparks of the Western District of Texas dismissed a lawsuit alleging that Whole Foods had misrepresented the amount of sugar in its private-label Greek yogurt. The plaintiffs filed a total of eleven lawsuits (which were later consolidated into a multidistrict litigation) in which they alleged that Whole Foods advertised its Greek yogurt as having 2 grams of sugar per serving, even though Consumer Reports had tested the products and determined that they had approximately 11.4 grams of sugar per serving. The court held that these claims were preempted by the Nutrition Labeling and Education Act because the plaintiffs failed to allege that the scientific testing conducted by Consumer Reports complied with the prescribed testing methodology set forth in 21 C.F.R. § 101.9(g)(2). While the court declined to determine whether a plaintiff is affirmatively required to allege compliance with the FDA’s testing methodology to state a plausible claim, it held that the plaintiffs’ Complaint – which emphasized that Consumer Reports had tested six samples of Greek yogurt – demonstrated that Consumer Reports’ testing methodology did not comply with 101.9(g)(2), which requires twelve samples from randomly chosen lots. The court declined to reach any of Whole Foods’ remaining arguments; instead, it granted the plaintiffs leave to amend, encouraged them to attempt to obtain the required test results from a third party or conduct the required testing themselves, and stated that it would address Whole Foods’ additional arguments only if they re-filed their motion to dismiss. 

In re Whole Foods Market, Inc. Greek Yogurt Marketing & Sales Practices Litigation, Case. No. A-14-MC-2588-SS, 2016 WL 631532 (W.D. Tex. Feb. 16, 2016). 

The Post-Scalia Class Action Landscape

Supreme Court 35719-0001By Alexander M. Smith

On Saturday, Justice Antonin Scalia passed away after nearly three decades on the Supreme Court.  During that time, he authored many opinions, including Wal-Mart Stores, Inc. v. Dukes, Comcast Corp. v. Behrend, and AT&T Mobility LLC v. Concepcion, that significantly affected the class action landscape.  Several other legal bloggers have also recognized Scalia’s legacy in the class action arena and have described the impact his death may have going forward:

  • At Lexology, Donald R. Frederico notes that “[n]o one has done more to shape class action law than Justice Antonin Scalia” and explains that his decisions in Dukes, Concepcion, and Behrend will leave “an imprint that is likely to long survive his passing.”  
  • In an article on Law360, Vin Gurrieri describes the effect of Scalia’s passing and notes that “a more left-leaning justice could flip the court’s internal dynamics on key issues like class actions and arbitration agreements.”
  • And in the AmLaw Litigation Daily, Scott Flaherty describes Scalia’s “indisputable mark on the class action landscape” and notes that his rulings “forced lower court judges and lawyers alike to view issues of class certification through a lens that focused on the facts.”

First Circuit Affirms Barefoot Running Shoes Class Settlement

By Alexander M. Smith

On December 31, 2015, the First Circuit upheld a class action settlement between Vibram USA, Inc. and purchasers of Vibram FiveFingers footwear. The plaintiffs brought claims on behalf of a putative nationwide class under the consumer protection laws of Massachusetts, including Mass. Gen. Law. ch. 93A and 266, as well as claims on behalf of a putative Florida subclass under the Florida Deceptive and Unfair Trade Practices Act, F.S.A. §§ 501.201 et seq. The lawsuit alleged that Vibram represented that its FiveFingers shoes (which were advertised to facilitate “barefoot running”) would improve body awareness, reduce lower back pain and injury, and improve foot health, allegedly without sufficient scientific studies to substantiate these claims. The parties then settled, and the District of Massachusetts (Woodlock, J.) approved the settlement after a hearing. Pursuant to the settlement, class members received a settlement notice stating that the estimated recovery would be approximately $20 to $50 per pair. Due to a “higher-than-expected” number of claims, class members received only approximately $8.44 per pair of shoes, prompting a group of objectors to appeal. Although the court acknowledged the disparity between the estimated and the actual payment, it nonetheless held that this discrepancy did not void the settlement and that a refund of $8.44 was a fair settlement amount given the uncertainty plaintiffs would face at trial. It likewise dismissed the objectors’ other concerns, including the imposition of a proof-of-purchase requirement on objectors (but not on class members), the form of injunctive relief, the inclusion of a clear-sailing provision, and the total amount of attorney’s fees.

Bezdek v. Vibram USA, Inc., 809 F.3d 78 (1st Cir. 2015). 

Is the Chobani Yogurt False Advertising Dispute a Sign of Growing Food Fights?

By Jeremy M. Creelan

On January 29, 2016, U.S. District Judge David Hurd in the Northern District of New York ordered Greek Yogurt maker Chobani to end its recent advertisements negatively referencing the products of its biggest competitors, Yoplait (General Mills) and Dannon.

Chobani’s series of advertisements that began running in early January 2016 advertised their “Chobani Simply 100 Greek Yogurt,” which has “100 calories per serving with no preservatives or artificial ingredients.” In one of the advertisements, a woman reads the ingredients on a cup of Yoplait Greek 100 Yogurt while a voice is heard saying, "Potassium sorbate? Really? That stuff is used to kill bugs." In another advertisement, a woman throws a container of Dannon’s Light and Fit into a trash can as a voiceover questions, "Sucralose? Why? That stuff has chlorine added to it."  As found by the court, sucralose is an artificial sweetener and potassium sorbate is preservative that prevents yeast and mold growth; both are used in many food products and they have been found safe by the federal government.

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Civil Litigation Outlook For 2016

Gears SystemEarlier this month, Reid J. Schar, co-chair Jenner & Block’s white collar defense and investigations practice, published an article in Law360, which takes a look at several significant trends in civil litigation.  The article highlights a few of them, including burgeoning antitrust litigation at the Department of Justice, growth in securities and consumer class actions, the changes to Federal Rule of Civil Procedure 26(b) and the potential for marked increases in patent litigation.

Click here to read the full article and to learn more about these important changes to the landscape of civil litigation.

Another Supreme Court Rebuff To California Arbitration Rule

PillarsBy Michael A. Scodro

Issued on December 14, 2015, DirectTV v. Imburgia represents the newest in a line of Supreme Court decisions applying the Federal Arbitration Act (FAA) to enforce contractual arbitration provisions.  Here, a service agreement between DirectTV and its customers requires arbitration of any future disputes and expressly waives either party’s right to initiate arbitration on a class-wide basis, with the exception that, if the “law of your state” prohibits the waiver of class arbitration, then the arbitration provision as a whole “is unenforceable.”  Two customers sued DirectTV, seeking to proceed in court rather than arbitration on the theory that the “law of” their “state,” California, does indeed prohibit class-action waivers in arbitration.  It was this theory—requiring application of the term “law of your state” to California—that divided lower courts and attracted Supreme Court review. 

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California District Courts Continue to Assess the Implications of Mazza

By Mara Ludmer and Kelly M. Morrison

Car on a roadiStock_000010037918Large
The Ninth Circuit’s decision in Mazza v. American Honda appeared to be an instant game changer, providing defendants across the Circuit with an easy way to oppose certification of nationwide classes seeking remedies under California consumer protection laws.  The plaintiffs in Mazza alleged that Honda had misrepresented the safety features of its Acura vehicles in brochures, television commercials, and print advertisements.  On appeal, the Ninth Circuit held that the district court had “erroneously concluded that California law could be applied to the entire nationwide class.”  And “[b]ecause the law of multiple jurisdictions” would apply to “any nationwide class of purchasers,” the Ninth Circuit held that “variances in state law [would] overwhelm common issues and preclude predominance for a single nationwide class.” 

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