FTC Embarks on Rulemaking to Address Impersonation Fraud

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By: Elizabeth Avunjian

On December 16, 2021, the Federal Trade Commission (FTC) initiated a rulemaking to address government and business impersonation fraud, which involves “[i]mpersonators us[ing] all methods of communication to trick their targets into trusting that they are the government or an established business and then trad[ing] on this trust to steal their identity or money.”[1] While such fraud is not a novel concern, the pandemic has resulted in a sharp spike in cases, with reported costs to consumers increasing 85% year-over-year and $2 billion in total losses between October 2020 and September 2021.[2]

The FTC stated that it is “prepared to use every tool in [its] toolbox to deter government business impersonation fraud, penalize wrongdoers, and return money to those harmed.”[3] Indeed, the FTC’s Advance Notice of Proposed Rulemaking, the first rulemaking initiated under the FTC’s streamlined rulemaking procedures, notes that an “impersonator rule that builds on the existing sector- and method-specific rules could more comprehensively outlaw government and business impersonation fraud.”[4] Though the FTC has previously addressed such schemes through law enforcement actions, the Supreme Court’s recent decision in AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1352 (2021)—which we previously reported on here—has limited the FTC’s remedial options for actions brought pursuant to its statutory authority.[5]

The FTC is soliciting public comments for a period of 60 days after publication in the Federal Registrar regarding “the prevalence” of impersonation schemes, “the costs and benefits of a rule that would address them, and alternative or additional action to such a rulemaking.” If public comments evidence the need for a trade regulation rule, the next step will be for the FTC to issue a notice of proposed rulemaking.

 

[1] “FTC Launches Rulemaking to Combat Sharp Spike in Impersonation Fraud”, December 16, 2021, available at https://www.ftc.gov/news-events/press-releases/2021/12/ftc-launches-rulemaking-combat-sharp-spike-impersonation-fraud?utm_source=govdelivery.

[2] Id.

[3] Id.

[4] Advance Notice of Proposed Rulemaking, at 10.

[5] Advance Notice of Proposed Rulemaking, at 7, n. 24 (citing AMG Cap. Mgmt., LLC v. FTC, 141 S. Ct. 1341, 1352 (2021) to explain that “The U.S. Supreme Court recently held that equitable monetary relief, including consumer redress, is not available under Section 13(b) of the FTC Act.”); see also “Statement by FTC Acting Chairwoman Rebecca Kelly Slaughter on the U.S. Supreme Court Ruling in AMG Capital Management LLC v. FTC”, April 22, 2021, https://www.ftc.gov/news-events/press-releases/2021/04/statement-ftc-acting-chairwoman-rebecca-kelly-slaughter-us?utm_source=govdelivery.


Three Strikes, You’re Out! New York Federal Courts Reject Three Implausible Mislabeling Actions

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By: Lindsey A. Lusk

New York federal courts have recently shown a willingness to dismiss implausible mislabeling claims on the pleadings. The recent dismissal of three consumer class actions—all filed by the same plaintiff’s counsel—suggests that these federal courts are increasingly skeptical of lawyer-driven claims regarding alleged confusion over the labeling of popular food products.

On November 4, 2021, in Boswell v Bimbo Bakeries USA, Inc., Judge Furman of the Southern District of New York dismissed a putative class action alleging that Entenmann’s “All Butter Loaf Cake” was misleadingly labeled because it contained not only butter, but also soybean oil and artificial flavors.[1] In reaching this conclusion, the court specifically called out the plaintiff’s attorney for bringing “a long string of putative class actions . . . alleging that the packaging on a popular food item is false and misleading.”[2] Notably, the court took judicial notice not only of the labeling of the challenged Entenmann’s product, but also the labeling of other butter cake products—which the court deemed probative of the context in which consumers purchase these products.[3]

On November 9, 2021, in Kamara v. Pepperidge Farm Inc., Judge Castel of the Southern District of New York dismissed with prejudice a putative class action alleging that the term “Golden Butter Crackers” was misleading because the crackers also contained vegetable oil.[4] In so holding, the court noted that “a reasonable consumer could believe the phrase ‘Golden Butter’ refers to the product’s flavor and wasn’t a representation about the ingredients’ proportions.”[5] But even if a consumer did believe as much, “[t]he packaging accurately indicated that the product contained butter,” which was prominently featured on the ingredient list—second only to flour.[6] The court found that “[t]he complaint [did] not plausibly allege why a reasonable consumer would understand the phrase ‘Golden Butter’ to mean that ‘wherever butter could be used in the product, it would be used instead of using its synthetic substitute, vegetable oil.’”[7]

Even more recently, on December 3, 2021, in Warren v. Whole Foods Market Group Inc., Judge Kovner of the Eastern District of New York dismissed a putative class action alleging that the label of Whole Foods Market’s instant oatmeal misled consumers into thinking the product was sugar-free or low in sugar.[8] The court reasoned that “even if a reasonable consumer was unaware of sugar’s many names, or of the nutrition label’s purpose, the fact remains that the words ‘Sugar 11g’ are prominently displayed immediately next to the ingredient list.” As the court noted, “[t]hose words are hard to miss.”[9]

These rulings may signal that federal courts—at least in New York—are increasingly inclined to take a harder look at the pleadings in food mislabeling cases, as well as the broader context in which the products are sold, and grant motions to dismiss where the allegations come up short of plausible. While it is unlikely that these rulings will completely deter other plaintiffs’ lawyers from filing these lawsuits, they undoubtedly provide ammunition for defendants faced with similar food labeling lawsuits in New York federal courts.

 

[1] Boswell v. Bimbo Bakeries USA, Inc., No. 20-CV-8923 (JMF), 2021 WL 5144552, at *1 (S.D.N.Y. Nov. 4, 2021).

[2] Id.

[3] Id. at *4.

[4] Kamara v. Pepperidge Farm, Inc., No. 20-CV-9012 (PKC), 2021 WL 5234882, at *2 (S.D.N.Y. Nov. 9, 2021).

[5] Id.

[6] Id. at 5.

[7] Id.

[8] Warren et al. v. Whole Foods Market Group, Inc., No. 19CV6448RPKLB, 2021 WL 5759702, at *1 (E.D.N.Y. Dec. 3, 2021).

[9] Id.


Seventh Circuit Offers Useful Reminders about Removal

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By: Gabriel K. Gillett, Kelsey L. Stimple, and Howard S. Suskin

In Railey v. Sunset Food Mart, Inc., -- F.4th --, No. 21-2533, 2021 WL 4808222 (7th Cir. Oct. 15, 2021), the U.S. Court of Appeals for the Seventh Circuit affirmed the district court’s order remanding a class action asserting claims under the Illinois Biometric Information Privacy Act because the removal was untimely. Beyond the specific holding, the Court’s opinion serves as a useful reminder about some of the contours around removal of class actions, including under the Class Action Fairness Act (CAFA). We discuss some of those key principles below, through the lens of the Court’s decision.

Appellate courts can review remand orders in some situations. Though appellate courts typically lack jurisdiction to review remand orders, they have the discretion to do so for orders remanding a case removed under CAFA, 28 U.S.C. § 1453(c)(1), and are “free to consider any potential error in the district court’s decision.” Slip op. 4-5, 9 (quoting Brill v. Countrywide Home Loans, Inc., 427 F.3d 446, 451 (7th Cir. 2005)).

Removal may be permitted based on “complete preemption.” The defendant in Railey first argued that removal to federal court was appropriate because the named plaintiff—an employee at one of the defendant’s grocery stores—was represented by a union, and her claims were therefore preempted by the Labor Management Relations Act. See Slip op. 2. The court acknowledged that removal is appropriate if the plaintiff’s claims are “completely preempted” by federal law and that one of its recent decisions indicated that the plaintiff’s claims “may, in fact, be preempted by the Labor Management Relations Act.” Slip op. 9 (citing Fernandez v. Kerry, Inc., No. 21-1067, 2021 WL 4260667, at *1–2 (7th Cir. 2021)).

A defendant’s time to remove may be triggered by its own subjective knowledge or ability to learn key facts related to removal. The court held, however, that the defendant’s November 2020 notice of removal was untimely because it was not filed within 30 days of the plaintiff serving her complaint in February 2019. Slip op. 11. Defendants can remove a class action within 30 days after the case is filed, or 30 days after “the defendant receives a pleading or other paper that affirmatively and unambiguously reveals that the predicates for removal are present.” Walker v. Trailer Transit, Inc., 727 F.3d 819, 824 (7th Cir. 2013) Though the defendant claimed that the 30-day clock was triggered by the plaintiff confirming her union membership in an October 2020 interrogatory, it had acknowledged in oral argument that the complaint supplied enough information—the plaintiff’s name, dates of employment, job title, and job location—to ascertain that she was represented by a union. Slip op. 10. “Based on this information, diligent counsel had everything necessary to recognize that the Labor Management Relations Act may preempt [the plaintiff’s] or the class’s claims.” Slip op. 11.

The court was careful to caution that its opinion should not be read “to impose any meaningful burden on defendants” and it stood “fully by [its] prior determination that district courts are not required to engage in a ‘fact-intensive inquiry about what the defendant subjectively knew or should have discovered’ about the plaintiff’s case to assess the timeliness of a defendant’s removal.” Slip op. 11 (quoting Walker, 727 F.3d at 825. The court pointed out that the plaintiff was a union member working at the defendant’s store and “a defendant can be held to information about its own operations that it knows or can discern with ease.” Id. “That reality mean[t] that the 30-day removal clock in § 1446(b)(1) began to tick when [the plaintiff] served her complaint in February 2019” and the November 2020 notice of removal was therefore untimely. Id.

Still, the Seventh Circuit’s statement seems to be in at least some tension with the First Circuit’s categorical statement that “[t]he defendant has no duty, however, to investigate or to supply facts outside of those provided by the plaintiff.” Romulus v. CVS Pharmacy, Inc., 770 F.3d 67, 75 (1st Cir. 2014). The First Circuit explained its view as follows: “The district court reasoned that information on damages is not ‘new’ if the defendant could have discovered it earlier through its own investigation. This is not how the statute reads and would produce a difficult-to-manage test. … Determining what the defendant should have investigated, or what the defendant should have discovered through that investigation, rather than analyzing what was apparent on (or easily ascertainable from) the face of the plaintiff's pleadings, will not be efficient, but will result in fact-intensive mini-trials.” Id. at 73-76 (surveying somewhat different approaches the circuits have adopted). According to the First Circuit, “[e]very circuit to have addressed this issue has ... adopted some form of a bright-line rule that limits the court's inquiry to the clock-triggering pleading or other paper” provided by the plaintiff to the defendant. Id. at 74 (internal quotations omitted).

The 30-day deadline to remove is triggered (or not) based on the particular removal theory and related facts; “separate removal attempts are governed by separate removal clocks.” In January 2021, the defendant raised CAFA’s minimal diversity requirements as a second basis for removal to federal court. The court emphasized that the timeliness of this basis was unaffected by the timeliness of the earlier preemption argument because “[a] defendant may remove even a previously remanded case if subsequent pleadings or litigation events reveal a new basis for removal.” Slip op. 6. If they attempt to do so, “separate removal attempts are governed by separate removal clocks.” Id.

The court held that this minimal diversity basis for removal was not untimely. Slip op. 8. Though the plaintiff had moved out of Illinois and changed her domicile to Georgia in February 2020, the defendant only discovered this fact through its own investigation in January 2021. Slip op. 7; see 28 U.S.C. § 1453(b) (eliminating § 1446’s one-year limitation on diversity-based removal for class actions); cf. id. § 1332(d)(7) (evaluating diversity when case is filed or when diversity becomes apparent later based on “an amended pleading, motion, or other paper”). The court noted that “[a] plaintiff may trigger a removal clock—and protect itself against a defendant’s strategic maneuvering—by affirmatively and unambiguously disclosing facts establishing federal jurisdiction in an initial pleading or subsequent litigation document.” Slip op. 7 (internal quotations omitted). But because the plaintiff had not done so here and the defendant discovered the federal jurisdiction basis independently, the defendant could “remove the case at whatever point it deems appropriate, regardless of whether the window for removal on another basis already opened and closed.” Slip op. 7.

CAFA’s exception for “home-state controversies” may bar even timely removals. The case still had to be remanded to state court, however, because the minimal diversity exception faced a different barrier. CAFA removal is subject to an exception for “home-state controversies,” where “two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.” 28 U.S.C. § 1332(d)(4)(B); see Slip op. 8. “By limiting the class to Illinois citizens, [the plaintiff] eliminated any concern that any [defendant] employees domiciled outside the state comprise greater than one-third of the class and all but ‘guaranteed that the suit would remain in state court.’” Slip op. 8 (quoting In re Sprint Nextel Corp., 593 F.3d 669, 676 (7th Cir. 2010)).


FTC Warns Companies It Will Impose Civil Penalties for Misleading Online Reviews

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By: Jacob D. Alderdice

Shoppers in online marketplaces, or customers checking reviews before dining or retaining a service, have become increasingly reliant on internet testimonials. Mark P. of Hoboken, NJ rates Hank’s Burger Depot 5 out of 5 stars, and he tells you it’s the best burger and shake he’s ever had. But did Hank promise Mark P. a free meal in exchange for leaving that review? Does Mark P. work at the Burger Depot? Does Mark P. even exist? As e-commerce, social media, and influencer marketing have all grown and become intertwined, it has become increasingly difficult to discern what constitutes an authentic positive review or endorsement for a product or service online.

Recently, the Federal Trade Commission issued a Laptop_iStock_000004929105Medium
formal warning to hundreds of companies across a wide span of US industries, indicating that it will penalize deceptive practices related to fake or misleading reviews and endorsements. This warning follows increased litigation in recent years over these practices, which remains ongoing.

On October 13, 2021, the FTC formally issued a Notice of Penalty Offenses, stating it was “blanketing industry” with the warning that the FTC will use its penalty powers under Section 5(m)(1)(B) of the FTC Act if those companies engage in deceptive conduct regarding online endorsements and reviews. The list of more than 700 companies includes many of the biggest companies in the United States, including Amazon, Google, and Walmart, in a variety of sectors, and also includes advertisers and advertising agencies. The inclusion of the companies does not mean they have engaged in these practices previously, but it does mean that the FTC will find that they are on notice of the prohibition if they are found to have engaged in such deceptive practices in the future. The penalties for future violations are significant—up to $43,792 for each violation.

The Notice defines the deceptive conduct as including—but not limited to—falsely claiming an endorsement by a third party; misrepresenting whether an endorser is an actual, current, or recent user; using an endorsement to make deceptive performance claims; failing to disclose an unexpected material connection with an endorser; and misrepresenting that the experience of endorsers represents consumers’ typical experience. The FTC issued FAQs elaborating on the proscribed conduct. For example, the proscribed “unexpected material connection” could include the endorser being a relative or employee of the marketer, or if the endorser has been paid or given something of value to tout the product.

The FTC’s announcement that it will rely on its Section 5 civil penalty powers pursuant follows a recent Supreme Court ruling that stripped the FTC of other enforcement powers. In late April 2021, the Court unanimously ruled in AMG Capital Management, LLC v. FTC that Section 13(b) of the FTC Act does not allow the FTC to seek monetary remedies in federal court. Immediately following the ruling, then-FTC Commissioner (and recently confirmed CFPB Director) Rohit Chopra urged the FTC to “deploy the FTC’s dormant Penalty Offense Authority” under Section 5 to make up for the loss of the Section 13(b) powers. In October 2020—in anticipation of the Court’s ruling in AMG Capital Management—Chopra co-authored an article in the University of Pennsylvania Law Review with Samuel A.A. Levine, titled “The Case for Resurrecting the FTC Act’s Penalty Offense Authority,” which maps out the FTC’s penalty offense authority under Section 5(m)(1)(B) of the FTC Act and promotes the use of that authority particularly for “online disinformation.”

Aside from the FTC, consumers and competitors have increasingly litigated these questions in the past few years, seeking ways of holding companies accountable for faking reviews in order to gain a leg up on competitors or mislead consumers. Litigants have relied on the Lanham Act’s prohibition against false advertising, state consumer protection statutes, and other state law claims. Outcomes have been mixed, depending on the legal theory and the parties’ ability to prove or sufficiently allege that a company has falsified reviews. A sample of recent cases related to fake online reviews or endorsements across jurisdictions appears below:

  • In a dispute between two cloud-based communications services, RingCentral asserted defamation claims against Nextiva both for Nextiva’s alleged fake negative reviews of RingCentral, and Nextiva’s fake positive reviews of itself—which RingCentral alleged cast it in a bad light by comparison. At the summary judgment stage, a judge in the District Court for the Northern District of California dismissed RingCentral’s defamation claims as to the fake positive reviews, holding that those reviews—which were only about Nextiva—were not “of or concerning” the plaintiff RingCentral, a required element for a defamation claim. See Ringcentral, Inc. v. Nextiva, Inc., No. 19-CV-02626-NC, 2021 WL 2476879, at *2 (N.D. Cal. June 17, 2021).

  • In a dispute between two companies selling dietary supplements, Vitamins Online alleged that the defendant NatureWise manipulated the Amazon.com customer review system by, among other things, directing its employees to “up vote” its products’ good reviews, and offering free products to customers in exchange for good reviews. Following a bench trial, a judge in the District Court for the District of Utah held that this conduct violated the Lanham Act’s prohibition of false advertising and Utah’s common law unfair competition laws. See Vitamins Online, Inc. v. HeartWise, Inc, No. 2:13-CV-00982-DAK, 2020 WL 6581050, at *21 (D. Utah Nov. 10, 2020). The court held that Vitamins Online was entitled to the disgorgement of NatureWise’s ill-gotten profits of nearly $10 million.

  • In the District of New Jersey, courts have held that the allegations that companies manipulated Amazon reviews of their products, such as by faking customer reviews or flooding the site with “professional reviews” (those elicited by the company’s offering of a free product), are sufficient to state claims under federal and state false advertising laws, as well as claims for tortious interference with prospective business advantage. See AlphaCard Sys. LLC v. Fery LLC, No. CV1920110MASTJB, 2020 WL 4736072, at *3 (D.N.J. Aug. 14, 2020); Interlink Products International, Inc. v. F & W Trading LLC, No. 15-1340, 2016 WL 1260713, at *9 (D.N.J. Mar. 31, 2016).

  • Casper Sleep, Inc., the online company selling Casper mattresses, has been a fairly active litigant regarding allegedly fake or manipulated online reviews—both as a plaintiff and defendant. Recently, in the Southern District of New York, a mattress competitor asserted counterclaims under the Lanham Act, alleging that Casper faked its positive Amazon reviews. The competitor relied upon an “independent website” that assesses Amazon reviews, which gave Casper a “fail” grade due to purported indicators of “unnatural reviews,” such as many positive reviews with no corresponding comments and the wholesale deletion of large portions of Casper’s positive reviews. The court granted Casper’s motion to dismiss these claims, holding that the allegations were too speculative to show that Casper actually faked the positive Amazon reviews. See Casper Sleep, Inc. v. Nectar Brand LLC, No. 18 CIV. 4459 (PGG), 2020 WL 5659581, at *11 (S.D.N.Y. Sept. 23, 2020); see also GhostBed, Inc. v. Casper Sleep, Inc., No. 0:15-CV-62571-WPD, 2018 WL 2213002, at *7 (S.D. Fla. May 3, 2018) (dismissing Lanham Act claims against Casper at the summary judgment stage, because the plaintiff did not establish that Casper made any false or misleading statements in its use of “affiliate relationships with online reviewers”).

Factors to Consider in Disclosing a Cybersecurity Breach to the SEC

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In this article published by Westlaw Today, Partners Brian R. Boch and Charles D. Riely and Associate William R. Erlain explain that the US Securities and Exchange Commission has ramped up its enforcement against misleading cybersecurity disclosures and announced plans to consider adopting new disclosure obligations. The authors highlight key factors to consider in determining whether and how a public company should disclose a cybersecurity breach in light of recent SEC guidance, enforcement actions and investigations, and private securities actions.

Click here to read the full article.


California Law Adds New Restrictions on Recyclability Claims

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By: Allison A. Torrence

RecyclingOn October 5, 2021, California Governor Newsom signed SB 343, addressing recyclability claims on products and in advertising. The Act amends existing sections of California’s Business and Professions Code as well as the Public Resource Code relating to environmental advertising. These laws collectively provide California’s version of recyclability consumer protection laws, similar to but going beyond the Federal Trade Commission Guides for the Use of Environmental Marketing Claims (Green Guides).

Prior to SB 343, existing California law made it unlawful for any person to make any untruthful, deceptive, or misleading environmental marketing claim, and required that environmental marketing claims be substantiated by competent and reliable evidence. Additionally, a person making any recyclability claims was required to maintain written records supporting the validity of those representations, including whether, the claims conform with the Green Guides.

Those requirements are generally left intact, with additional obligations added by SB 343. The first big change made by SB 343 is to specifically add the use of the chasing arrow symbol as a way that a person might make a misleading environmental marketing claim in marketing or on a product label. (Business and Professions Code § 17580(a).) Next, SB 343 requires the Department of Resources Recycling and Recovery, by January 1, 2024, to update regulations requiring disposal facilities to provide information on recycling data. Based on the information published by the department, a product or packaging is considered recyclable only if the product or packaging is collected for recycling by recycling programs for jurisdictions that collectively encompass at least 60% of the population of the state. (Public Resources Code § 42355.51(d)(2).) The new law also provides additional criteria related to curb-side recycling, that grow more stringent over time, and PFAS content of plastic material, among other provisions. (Public Resources Code § 42355.51(d)(3).) A person making recyclability claims must keep written records of whether the consumer good meets all of the criteria for statewide recyclability pursuant to these new provisions. (Business and Professions Code § 17580(a)(6).)

Finally, while existing California law governed what resin identification code could be placed on plastic containers (i.e., #1 PETE, #2 HDPE), SB 343 states that resin identification code numbers cannot be placed inside a chasing arrows symbol unless the rigid plastic bottle or rigid plastic container meets the new statewide recyclability criteria discussed above. (Public Resources Code § 18015(d).)

This new law is another hurdle facing companies making environmental marketing claims. For companies selling products in California, it is not sufficient to simply follow the FTC Green Guides. Instead, companies must be aware of the specific nuances and requirements in California and developments in other states.


Ninth Circuit Puts a Cap on Coca-Cola Class Certification Order

 

By: Alexander M. Smith

SodaA new decision in the Ninth Circuit significantly limits which consumers may have standing to seek an injunction against false advertising or labeling. For the past several years, the law in the Ninth Circuit was that a “previously deceived consumer may have standing to seek an injunction against false advertising or labeling, even though the consumer now knows or suspects that the advertising was false at the time of the original purchase,” because a consumer’s “[k]nowledge that the advertisement or label was false in the past does not equate to knowledge that it will remain false in the future.” Davidson v. Kimberly-Clark Co., 889 F.3d 956, 969 (9th Cir. 2018). But in August 2021, the Ninth Circuit significantly limited this holding by clarifying that a consumer’s “abstract interest in compliance with labeling requirements” or desire for a manufacturer to “truthfully label its products” does not suffice to establish Article III standing under Davidson. Engurasoff v. Coca-Cola Refreshments USA, Inc., No. 25-15742, 2021 WL 3878654, at *2 (9th Cir. Aug. 31, 2021).

Engurasoff arises out of a long-running multidistrict litigation in which the plaintiffs alleged that Coke, Coca-Cola’s signature cola, is mislabeled as having “no preservatives” and “no artificial flavors” because it contains phosphoric acid, which allegedly functions as both an “artificial flavor” and a “chemical preservative.” In February 2020, the district court granted the plaintiffs’ motion to certify an injunctive relief class under Rule 23(b)(2) and held that they had established standing to seek injunctive relief under Davidson. In reaching this conclusion, the district court reasoned that consumers could satisfy Davidson by alleging either (1) that “their inability to rely on the labels would cause them to refrain from purchasing a product that they otherwise would want” or (2) that they would “purchase the product in the future, despite the fact that it was once marred by false advertising or labeling, because they may reasonably, but incorrectly assume the product was improved.” In re Coca-Cola Mktg. & Sales Practices Litig., No, 14-2555, 2020 WL 759388, at *5 (N.D. Cal. Feb. 14, 2020) (citation and internal quotation marks omitted). The district court agreed with Coca-Cola that the plaintiffs did not satisfy the second test because there was no reasonable possibility that Coca-Cola would stop using phosphoric acid as an ingredient in Coke, whose formula—leaving aside the ill-fated rollout of New Coke—has remained largely unchanged for over a century. But the district court nonetheless found that the plaintiffs had satisfied the first test by alleging that they would purchase Coke in the future, even if it continued to contain phosphoric acid, so long as the labeling either disclosed the presence of phosphoric acid or refrained from representing that Coke was free of preservatives and artificial flavors. See id. at *7-9.

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Customers Cannot Assert a Claim Based on Starbucks’s Alleged Failure to Provide the “Perfect” Coffee Experience

   

By: Kate T. Spelman

CoffeeOn August 27, 2021, the Second Circuit upheld dismissal of a putative class action brought by Starbucks customers under New York consumer protection statutes. The plaintiffs alleged that Starbucks’s marketing materials promoting the quality of its coffee – including claims such as “the finest whole bean coffees,” “Best Coffee for the Best You,” and a “PERFECT” coffee experience – were misleading due to the chain’s alleged use of pest-control pesticides in some of its Manhattan stores. The district court disagreed, dismissing the complaint on the basis that the plaintiffs did not allege “any statements likely to mislead reasonable consumers.” George v. Starbucks Corp., No. 19-6185, 2020 WL 6802955, at *2 (S.D.N.Y. Nov. 19, 2020). The court found that the vast majority of the challenged statements were patently puffery, while the only statement that could conceivably support a claim for deceptive business practices – that Starbucks baked goods contain “no artificial dyes or flavors” – was not rendered false or misleading by the alleged use of pesticides in Starbucks’s stores. Id.

Undeterred, the plaintiffs appealed to the Second Circuit, arguing that Starbucks’s advertising implied quality and purity inconsistent with the use of pesticides. Again, the plaintiffs were rebuffed by the court. In a short summary order, the Second Circuit agreed with the district court’s reasoning and held that “almost all of Starbucks’s statements referenced in the amended complaint constitute puffery.” George v. Starbucks Corp., No. 20-4050-CV, 2021 WL 3825208, at *1 (2d Cir. Aug. 27, 2021). Those that were “specific enough to be more than puffery” referred only to “how Starbucks sources its products and crafts its coffee and the ingredients it uses in its baked goods” such that “[n]o reasonable consumer would believe that these statements communicate anything about the use of pesticide[s] in Starbucks’s stores.” Id. at *2.

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The Ninth and Seventh Circuits Revive Robocall Suits Under the TCPA

 

By: Lina R. Powell

Smartphone computerCourts have seen a flurry of activity in the Telephone Consumer Protection Act (TCPA) realm this year—and August was no exception. In April 2021, the Supreme Court’s Facebook v. Duguid, 141 S. Ct. 1163 (2021), settled the long-debated question of what constitutes an automatic telephone dialing system under the TCPA, 47 U.S.C. § 227. Many anticipated the Court’s willingness to narrow the scope of claims brought under the statute would narrow the number of lawsuits brought under the TCPA. But TCPA cases continue to proliferate, and two appellate courts recently revived claims based on the TCPA.

On August 10, 2021, the Ninth Circuit revived a lawsuit against Fraser Financial and Insurance Services, holding that job recruitment robocalls received by cell phones fall within the TCPA’s scope if the call “did not involve an emergency and was not made with [the consumer’s] prior express consent.” Loyhayem v. Fraser Fin. & Ins. Servs., Inc., ---F. 4th---, 2021 WL 3504057, *2 (9th Cir. Aug. 10, 2021). The TCPA generally makes it illegal to place robocalls to someone’s home phone or cell phone. The Ninth Circuit held that the district court misread the governing robocall consent standards in dismissing the action. While the plaintiff admitted that the robocalls did not involve “advertising or telemarketing”—which are prohibited under the TCPA—the Ninth Circuit rejected the argument that only robocalls involving “advertising or telemarketing” are subject to the TCPA. Id. Rather, the Ninth Circuit noted that the TCPA applies to “any call” that is “made to a cell phone using an automatic telephone dialing system or an artificial or pre-recorded voice, unless the call is made either for emergency purposes or with the prior express consent of the person being called,” and that such consent be given either orally or in writing. Id. The Ninth Circuit found that the plaintiff’s allegations that he had not consented orally or in writing to receiving Fraser Financial’s call were sufficient to survive a motion to dismiss. Id. at *3.

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A Benefytt or a Curse: Ninth Circuit Holds That Bristol-Myers Does Not Apply Before Class Certification

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By: Alexander M. Smith

In 2017, the Supreme Court held in Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017), that a defendant in a mass tort action is not subject to specific personal jurisdiction as to the claims of non-resident plaintiffs whose injuries lack a sufficient connection to the forum state. The Court did not decide, however, whether its holding applied to nationwide class actions. And in the four years following Bristol-Myers, district courts in the Ninth Circuit have reached highly divergent results:

  • Some district courts have “agree[d] . . . that Bristol-Myers Squibb applies in the nationwide class action context” and have dismissed claims brought on behalf of putative nationwide classes, reasoning that “a state cannot assert specific personal jurisdiction for the claims of unnamed class members that would not be subject to specific personal jurisdiction if asserted as individual claims.” Carpenter v. PetSmart, Inc., 441 F. Supp. 3d 1028, 1035 (S.D. Cal. 2020); see also, e.g., Wenokur v. AXA Equitable Life Ins. Co., No. 17-165, 2017 WL 4357916, at *4 (D. Ariz. Oct. 2, 2017) (“The Court notes that it lacks personal jurisdiction over the claims of putative class members with no connection to Arizona and therefore would not be able to certify a nationwide class.”).

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