Ninth Circuit Not Sweet on Plaintiffs’ Interpretation of Trader Joe’s Honey Label

 

By: Alexander M. Smith

HoneyOn July 15, 2021, the Ninth Circuit issued a published decision in Moore v. Trader Joe’s Company in which it affirmed the dismissal of a lawsuit alleging that Trader Joe’s mislabeled its Manuka honey as “100% New Zealand Manuka Honey.” While the plaintiffs alleged that this statement was misleading because the honey was derived from floral honey sources other than Manuka flower nectar, the Ninth Circuit found that the labeling was not likely to mislead a reasonable consumer because it satisfied the FDA’s regulations governing the labeling of honey. Because “Trader Joe’s Manuka Honey is chiefly derived from Manuka flower nectar,” the Ninth Circuit concluded that “Manuka is therefore the chief flower source for all of the product’s honey under the FDA’s definition, even if some of it is derived from nectar from other floral sources.” Thus, “there is no dispute that all of the honey involved is technically manuka honey, albeit with varying pollen counts.”

The Ninth Circuit also rejected the plaintiffs’ argument “that ‘100% New Zealand Manuka Honey’ could nonetheless mislead consumers into thinking that the honey was ‘100%’ derived from Manuka flower nectar.” Although it acknowledged that “there is some ambiguity as to what ‘100%’ means in the phrase, ‘100% New Zealand Manuka Honey,’” the court nonetheless found that this ambiguity was unlikely to mislead a reasonable consumer, as “other available information about Trader Joe’s Manuka Honey would quickly dissuade a reasonable consumer from the belief that Trader Joe’s Manuka Honey was derived from 100% Manuka flower nectar.” 

This decision builds upon other recent decisions in which the Ninth Circuit has rejected product mislabeling claims based on decontextualized and therefore implausible interpretations of product labels. See, e.g., Becerra v. Dr Pepper/Seven Up, Inc., 945 F.3d 1225 (9th Cir. 2019) (holding that a reasonable consumer would understand the word “diet” on a soda label in context to make a comparative claim only about the product’s caloric content, not to make a claim that the soda promotes weight loss generally). Although the Ninth Circuit has historically been viewed as friendly to plaintiffs in food-labeling litigation, Becerra and Moore signal that courts in the Ninth Circuit are becoming increasingly skeptical of these claims.


Supreme Court Limits Article III Standing for Class Action Plaintiffs: Implications for Data Breach Class Actions

   

By: Clifford W. BerlowAlexander E. Cottingham, and Lindsay C. Harrison

SCOTUSIntroduction

On June 25, 2021, the US Supreme Court in TransUnion LLC v. Ramirez[1] narrowed the scope of Article III standing for plaintiffs who allege the violation of a statute but cannot show they otherwise suffered harm. Though decided in the context of a Fair Credit Reporting Act (FCRA) class action, the decision has major implications for parties litigating state and federal statutory claims of all varieties in federal courts. In particular, TransUnion seems poised to limit the viability of class actions arising from data breaches. The decision likely means, for example, that plaintiffs lack Article III standing when their information may have been accessed but was not misused in a manner causing concrete harm—a subject on which the courts of appeals previously had split. The decision also will limit plaintiffs’ ability to assert Article III standing merely based on the violation of privacy statutes alone without any resulting harm. 

Defendants litigating data breach class actions can take advantage of this new precedent in federal court to seek dismissal of data breach class actions for lack of Article III standing. But doing so is not without consequence. If federal courts are not available to adjudicate these claims, plaintiffs likely will pursue them in state courts, where standing precedent may be more lenient for plaintiffs. Defendants thus will need to be strategic about how aggressively they pursue TransUnion-based dismissals.

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Supreme Court Gives More Tools for Defendants to Challenge Class Certification in Securities Fraud Cases

   

By: Ali M. Arain, Stephen L. Ascher, Howard S. Suskin, and Reanne Zheng

Supreme Court PillarsIntroduction

On June 21, 2021, the US Supreme Court issued its decision in Goldman Sachs Group Inc. v. Arkansas Teacher Retirement System,[1] providing guidance to lower courts regarding class certification in securities fraud class actions. On balance, the opinion favors defendants, and potentially signals a backlash against the tide of securities fraud class actions based on vague and generic misstatements. Importantly, the Court instructed that all relevant evidence should be considered when making the class certification decision, sending a message that lower courts must grapple with and cannot ignore relevant evidence at the class certification stage simply because it overlaps with the merits-related evidence. The Court also stressed that the generic nature of a misrepresentation is often important evidence of lack of price impact, which lower courts should consider when deciding whether to grant or deny a class certification motion. 

Although the Supreme Court’s decision was not as sweeping as the defendants wanted, it does signal the Supreme Court’s concern that companies are too frequently held liable for securities fraud as a result of adverse legal or business developments, even where the company had never made any specific statements about the matters in question.

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Future of Fintech Charter Unclear

 

By: Lindsey A. Lusk

FintechA legal battle over a charter to allow Fintech companies to become special purpose national banks has been put on pause. But for how long will the future of the charter remain in limbo? On June 16, 2021, the Conference of State Bank Supervisors (the CSBS) and the Office of Comptroller of the Currency (OCC) agreed to stay the litigation, and the district court approved a motion formalizing the parties’ agreement to put the litigation on hold for 90 days,[1] though some analysts have warned that the fate of the charter still may not be easily resolved.[2]

The pause follows the recent dismissal of a similar case in the Southern District of New York. In Lacewell v. Office of the Comptroller of the Currency, the New York Department of Financial Services (DFS) was attempting to block the OCC’s special purpose national bank charter (the “Fintech charter”). The Fintech charter would allow certain non-depository Fintech companies to operate as “special purpose national banks” under the National Bank Act (NBA). Accordingly, the Fintech companies would not be subject to state-by-state regulation and licensing. DFS argued that the charter is unlawful because it exceeds the OCC’s authority under the NBA.[3]

The case had been pending on appeal in the Second Circuit since April of 2020, after the district court denied the OCC’s motion to dismiss and found that DFS had standing to sue.[4] The Second Circuit heard oral argument in March 2021, and reversed the lower court’s ruling on June 3, holding that DFS lacked standing to challenge the Fintech charter.[5] It remanded the case to the district court with instruction to dismiss without prejudice.[6]

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Two Recent Circuit Court Decisions Provide Insight Into How Attorneys’ Fee Awards Can Impact Class Settlement Approval

 

By: Elizabeth Avunjian

New-Development-IconEarlier this month, and just two days apart, the Ninth and Eleventh Circuits reached opposite conclusions regarding two class action settlements: the Ninth Circuit overturned approval of a class settlement related to the alleged mislabeling of cooking oil in Briseno v. Henderson, while the Eleventh Circuit upheld all but one element of a class settlement related to the 2017 Equifax data breach in In Re Equifax Inc. Customer Data Sec. Breach Litig. Despite the courts’ divergent holdings, their analyses provide insight into how federal courts review fee awards in assessing the reasonableness of class settlements.

Notably, the Ninth Circuit took one step further than the Eleventh Circuit in applying newly-revised Federal Rule of Civil Procedure 23(e)(2) to impose a “heightened inquiry” obligation on district courts “to scrutinize attorneys’ fees for potential collusion that shortchanges the class, even in post-class certification settlements.” Briseno v. Henderson, No. 19-56297, 2021 WL 2197968, at *6, 13 (9th Cir. June 1, 2021).

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Another Vanilla Bean Lawsuit is Nipped in the Bud

 

By: Madeline Skitzki

VanillaOn June 14, 2021, Judge Jeffrey S. White of the Northern District of California dismissed yet another lawsuit challenging representations about vanilla on food products.  In that lawsuit—Lisa Robie v. Trader Joe’s Company, Case No. 4:20-cv-07355-JSE—the plaintiff alleged that Trader Joe’s mislabels its Almond Clusters cereal as “Vanilla Flavored With Other Natural Flavors,” when in fact (1) the cereal contains only trace amounts of real vanilla, and (2) the predominant source of the vanilla taste is from the artificial flavors vanillin and ethyl vanilla.

The court dismissed the claims on several grounds, with leave to amend. First, the court found that, to the extent the plaintiff challenged the product’s flavors—as opposed to its ingredients—as unnatural, those claims were preempted by the FDA’s flavor regulations. Second, the court found that the statutory and common law claims failed as a matter of law because the plaintiff did not plausibly allege that a reasonable consumer would interpret the “vanilla” representation to mean that the product’s flavor is derived exclusively from the vanilla plant. In so holding, the court found that the plaintiff failed to plausibly allege that the vanillin in the cereal is necessarily artificial. The court also noted that the label did not include any words or pictures suggesting the cereal’s vanilla flavor is derived exclusively from the vanilla bean or plant. And even if the label’s reference to “vanilla” would lead consumers to believe that the product contains vanilla from the vanilla plant, the court found no deception because the plaintiff conceded that the product does contain some real vanilla. The court also dismissed the plaintiff’s equitable claims because she had not alleged that she lacked an adequate remedy at law.

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Courts Express Reluctance to Regulate Market Prices Via Consumer Protection Claims

 

By: Lindsey A. Lusk

DrugstoreConsumers seeking to hold companies accountable for differential pricing of allegedly materially identical products have recently faced push-back from several federal courts. In May 2021, two federal courts dismissed consumer-protection claims based on price differentials between such products.

In Schulte v. Conopco, et al., the Eighth Circuit affirmed the Missouri district court’s dismissal of a Missouri Merchandising Practices Act (MMPA) claim premised on allegedly discriminatory price differentials between women’s and men’s deodorant products (a so-called “pink tax” claim). 2021 WL1971957 at *1 (8th Cir. May 18, 2021). The appellate court held that the plaintiff failed to meet the plausibility pleading standard and was mistaking “gender-based marketing for gender discrimination.” Id. The court also noted that the plaintiff was “conflate[ing] marketing targeted to women with enforced point-of-sale pricing by gender,” and that the plaintiff’s choice not to purchase men’s antiperspirant “illustrates a difference in demand based on product preferences.” Id. Because “preference-based pricing is not necessarily an unfair practice,” the court held that the MMPA did not prohibit the defendants’ differential pricing.

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Analysis of Recent and Forthcoming State Legislation on Toxic Chemicals in Cosmetics and Personal Care Products and Preemptive Effects of Existing Federal Legislation

 

By: Matthew G. Lawson

  1. Personal_Care_ProductsIntroduction

According to a report released in February 2021 by the organization Safer States, at least 27 US states will consider proposed legislation to regulate toxic chemicals in 2021. While a large driver of the proposed state laws is growing public concern over drinking water contamination from “emerging contaminants,” including PFAS (per- and polyfluorinated alkyl substances) and 1,4-dioxane, a secondary focus has been to minimize the risk of adverse human health effects from exposure to these toxic chemicals in cosmetics and personal care products. Two states—New York and California—are spearheading these efforts through recently enacted laws to limit or prohibit certain toxic chemicals in cosmetics and personal care products that are set to take effect in 2022 and 2025, respectively. As other states consider their own bills to enact similar regulation of chemicals in cosmetics and personal care products, heightened attention will likely be paid to what extent the existing federal regulation of these products may preempt this new wave of state legislation.

  1. Federal Regulation of Chemicals in Cosmetics and Personal Care Products

At the federal level, chemicals used in cosmetics and other personal care products are primarily regulated by either the Toxic Substrates Control Act (TSCA) or the Federal Food, Drug, and Cosmetic Act (FD&C Act). While TSCA broadly applies to any “chemical substance,” certain chemicals or uses of chemicals are exempt from TSCA if they are regulated by other federal statutes. Such products include “cosmetics” regulated by the FD&C Act, which are defined as “articles intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body...for cleansing, beautifying, promoting attractiveness, or altering the appearance.” While the distinction between a cosmetic and personal care product may not always be apparent to the consumer, the difference is crucial with respect to federal oversight of the chemicals contained in the product.

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Federal Reserve Seeks Public Comment on Guidelines for Accepting Fintechs

 

By: Anthony L. Nguyen 

FintechThe Federal Reserve is seeking public comment on proposed guidelines to regulate financial technology companies’ access to The Fed’s payment systems. The Fed has proposed guidelines to evaluate access requests from these “novel types of banking charters” with a “transparent and consistent process.”

According to Federal Reserve Board Governor Lael Brainard, the proposed guidelines intend to promote “a safe, efficient, inclusive, and innovative payment system, consumer protection, and the safety and soundness of the banking system."

Public comments will be accepted for 60 days after publication in the Federal Register.

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FTC Asks Congress: Restore Our Power to Protect Consumers

 

By: Anthony L. Nguyen and Jeremy M. Creelan

New-Development-IconOn April 27, 2021, the Federal Trade Commission (FTC), through its acting Chairwoman, testified before the Subcommittee on Consumer Protection and Commerce to support proposed legislation that would revive FTC’s ability to seek restitution and disgorgement on behalf of consumers harmed by violations of the FTC Act of law.

From the 1980s until recently, the FTC took the position that Section 13(b) of the FTC Act, which permits injunctive relief, also authorized it to seek restitution, disgorgement, and other equitable monetary relief. FTC Testimony at 2. The FTC used Section 13(b) to reclaim and refund billions of dollars on behalf of consumers in various types of cases, including telemarketing, fraud, anticompetitive pharmaceutical practices, data security and privacy, scams that target seniors and veterans, deceptive business practices, and COVID-related scams. Id. at 1.

Rebecca Kelly Slaughter, acting Chairwoman of the FTC, testified that “the Supreme Court ruled that courts can no longer award refunds to consumers in FTC cases brought under 13(b), reversing four decades of case law that the Commission has used to provide billions of dollars of refunds to harmed consumers.” Id. She testified that in AMG Capital Management, LLC v. FTC (as discussed in this blog post), the Supreme Court “held that equitable monetary relief such as restitution or disgorgement is not authorized by the text of Section 13(b).” Id. at 3. She also noted that other appellate courts had reached similar conclusions. For example, she noted that the Seventh Circuit had held that “the word ‘injunction’ in the statute allows only behavioral restrictions and not monetary remedies.” Id. (citing FTC v. Credit Bureau Center, LLC, 937 F.3d 764 (7th Cir. 2019)). And she noted that the Third Circuit had reversed an award of “$448 million meant to repay overcharged consumers” because it found that the order exceeded the authority provided by the FTC Act. Id. (citing FTC v. AbbVie Inc., 976 F.3d 327 (3d Cir. 2020)).

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