FDCA mostly preempts claims against ineffective decongestant

Posted on August 12, 2026 by rtushnet

Yousefzadeh v. Johnson & Johnson Consumer Inc., —
F.4th —-, 2026 WL 2192415, Nos. 24-3296 (L), 25-119 (CON) (2d Cir. Jul. 30,
2026)

Oral phenylephrine (oral PE), used in popular products as
Nyquil Severe Cold & Flu, Advil Sinus Congestion & Pain, and Mucinex
Sinus Max, was long considered an effective nasal decongestant. In 1994, the
FDA published a final monograph determining that oral PE was generally
recognized as safe and effective as a nasal decongestant.

Starting in 2007, however,
scientific studies began casting doubt on that finding. Indeed, in 2016, some
studies concluded that oral PE “[was] no more effective than [a] placebo” as a
decongestant. Yet, the FDA has continued to require manufacturers to adhere to
its existing labeling requirements denoting oral PE as effective.

In September 2023, the FDA convened an expert panel that
concluded, by a unanimous vote of 16-0, that oral PE products were ineffective
as nasal decongestants, and in 2024 it proposed an administrative order to remove
oral PE from the nasal decongestant monograph. Until the administrative order
becomes final, however, the FDA stated that, “[f]or now, companies may continue
to market OTC monograph drug products containing [oral PE] as a nasal
decongestant.”

What does this mean for this consumer protection lawsuit
alleging that, in the past decade, drug manufacturers have sold some $12
billion’s worth of ineffective nasal decongestants? This consolidated complaint
alleged NY GBL and common-law claims as well as RICO claims (which will not be
further discussed because they are RICO claims).

The district court found FDCA preemption and also rejected a
Lanham Act claim in a related case. The court of appeals found that the FDCA
expressly preempted the majority of the consumer plaintiffs’ state law claims. “Defendant
Manufacturers followed the FDA’s prescribed labeling requirements by
designating their decongestants’ purpose as decongestion. Defendant
Manufacturers cannot now be sued for complying with those FDA specifications.” Loper
Bright didn’t change things because it didn’t “subvert agencies’ authority
to promulgate preemptive regulations pursuant to the authority vested in them
by statute — authority the FDCA vests in the FDA here. Indeed, the Supreme
Court has given preemptive effect to federal regulations since before Chevron.”

The discussion is extensive, but a couple of points: There
was no duty to update the labeling merely because the ingredient didn’t work; “a
monograph drug could be considered misbranded if it has a dangerous effect on
the user, even when the drug’s label conforms to the monograph requirements,
thus allowing a manufacturer to add a safety disclaimer to the product’s label.”
But it’s not automatically misbranded if it is simply “ineffective when used as
recommended or suggested in the label.” Thus, the FDA had declined to impose additional
labeling requirements for ineffectiveness as opposed to safety risks. “Because
monograph drug manufacturers cannot utilize [a specifically provided-for]
process to unilaterally change their labels’ efficacy information, … their
obligation is to conform to the applicable monograph, not to update their
labels to reflect new scientific evidence.” To require additional disclosures
would be to impose a requirement other than that imposed by the FDCA, and “any
such compulsory language would not be permissible if it was inconsistent with
the statements required by the FDA.”

What about failure to disclose in marketing and advertising,
as distinct from labeling? The statute’s express preemption “voids state law
marketing and advertising claims, not only labeling claims,” by specifying that
its preemptive effect extends to “any requirement relating to public
information or any other form of public communication relating to a warning of
any kind for a drug.” Allowing failure-to-disclose claims would create an end run
around federal labeling rules.

Not preempted: Allegations that using “Maximum Strength” or
“Max Strength” on certain products constituted a false statement that the
products work better than other oral nasal decongestants, such as
pseudoephedrine. No FDCA provision or regulation addresses phrases such as
“Maximum Strength” or claims of comparative strength. “Defendant Manufacturers
therefore voluntarily and on their own accord placed these Maximum Strength
statements on their products; they were not obligated to do so. Consequently,
these additional statements are subject to the misbranding provision’s requirements
and cannot be rescued by the monograph or approved NDAs.”

In addition, manufacturers who obtained FDA approval through
the NDA (new drug application) process could have an independent duty to update
their drugs’ labels through the prescribed process to reflect newly acquired
information bearing on a drug’s efficacy. While that process is unavailable for
monograph drugs, it is available for brand-name NDA drugs, so the court remanded
for consideration of this theory as well.

What about the related Lanham Act claim, not brought by
consumer plaintiffs?  The district court
didn’t abuse its discretion in dismissing the claim because the
competitor-plaintiff neglected many opportunities to preserve or raise the
claim. Given the fact that there’s no preemption of federal claims, this seems
like a serious error on its part.

from Blogger https://tushnet.blogspot.com/2026/08/fdca-mostly-preempts-claims-against.html

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interactive website offering illegal-in-CT ghost guns wasn’t covered by CUTPA, but any sales were

Posted on August 12, 2026 by rtushnet

Connecticut v. Indie Guns LLC, NO. (X06) UWY-CV23-6072307S, 2026
WL 2322641 (Ct. Super. Ct. Aug. 6, 2026)

The state sued Indie Guns for selling illegal ghost guns
into Connecticut. Indie Guns defaulted, but the court only granted partial default
judgment—merely having an interactive website doesn’t make the company subject
to the Connecticut Unfair Trade Practices Act (CUTPA), although selling illegal
products into the state is deceptive and unfair in violation of the law.

“[A]n out-of-state or foreign company that operates an
interactive internet website is not, on that basis alone, engaged in trade or
commerce in Connecticut.” And CUTPA requires such in-state trade or commerce,
so this isn’t about personal jurisdiction but the scope of the law.

The state argued that the website was deceptive and unfair
because it advertised its products to all consumers without warning of their illegality,
and offered to sell to Connecticut consumers.

A violation of a Connecticut criminal statute such as the
ban on ghost guns does constitute a CUTPA violation via unfairness. Unfairness
requires considering: “(1) [W]hether the practice, without necessarily having
been previously considered unlawful, offends public policy as it has been
established by statutes, the common law, or otherwise—in other words, it is
within at least the penumbra of some common law, statutory, or other
established concept of unfairness; (2) whether it is immoral, unethical,
oppressive, or unscrupulous; (3) whether it causes substantial injury to
consumers, [competitors or other businesspersons].” “Inarguably, selling and
delivering illegal gun parts in Connecticut readily satisfies all three
criteria.”

So too with deception, which requires (1) a representation,
omission, or other practice likely to mislead consumers; (2) interpreted
reasonably under the circumstances; that is (3) material. “When a defendant
sells a product to a buyer, the defendant represents, expressly or implicitly,
that the product is legal in the state in which the buyer purchases or receives
delivery of the product.” (Given that this was a test buy, there was no actual
deception, but the state as enforcer isn’t required to show that.)

But there liability ended. CUTPA  defines “trade” and “commerce” as “the
advertising, the sale or rent or lease, the offering for sale or rent or lease,
or the distribution of any services and any property, tangible or intangible,
real, personal or mixed, and any other article, commodity, or thing of value in
this state.” (Emphasis added.). Actual sales/shipment to Connecticut
definitely constitute engaging in trade or commerce, but not “the mere
existence of an interactive website.” Although this does require the AG to wait
until illegal products are shipped to Connecticut, so it creates some risk,
that’s a policy decision for the General Assembly to make. (The court also
commented that reaching Connecticut via distributors or other independent
contractors would support application of CUTPA to a manufacturer.)

In part because of the default, we don’t actually know how
many times Indie Guns sold into Connecticut. “Those practical challenges are
likely why the state focuses on the Indie Guns’ website, rather than on gun
sales, as the basis for imposing civil penalties. Those practical challenges,
however, do not permit the court to speculate about the extent of Indie Guns’
sale of illegal gun parts to Connecticut consumers. Nor do those challenges
permit the court to ignore the geographic scope limits of CUTPA.”

The state was entitled to judgment that Indie Guns acted willfully
when it sold a ghost gun part to the investigator. But the state didn’t seek
the $5000 maximum penalty for that sale. It was entitled to a permanent
injunction against sales into Connecticut.

from Blogger https://tushnet.blogspot.com/2026/08/interactive-website-offering-illegal-in.html

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Foiled: Reynolds must face “Made in USA” class

Posted on August 12, 2026 by rtushnet

Washington v. Reynolds Consumer Products LLC, No. 1:24-cv-02327-ALC-RFT,
2026 WL 2210008 (S.D.N.Y. Jul. 30, 2026)

The court certified a class of NY consumers under the NYGBL’s
false advertising provisions, based on alleged falsity of aluminum foil that’s
sold with a label claiming, “FOIL MADE IN U.S.A.”

Plaintiffs argued that reasonable consumers expect that the
raw materials used in the products are sourced from within the United States
and that a substantial amount of the transformation of raw materials into the foil
takes place within the United States. But the only commercial source of aluminum
is bauxite. “Since 1981, none of the bauxite mined in the U.S. was used for
aluminum, and in 2013, U.S.-mined bauxite comprised less than 0.1 percent of
world production.” Thus, plaintiffs alleged, Reynolds must be sourcing from
outside the US.

To make aluminum foil, bauxite is processed and refined into
alumina, which is then turned into aluminum through smelting. The resulting ingots
undergo further processing to make aluminum foil. Plaintiffs alleged that a
substantial portion of this processing occurs outside of the United States.

Reynolds’ (bad) argument was that the “Made in the U.S.A.”
label referred only to the final foil itself, not to the ingots (as if people
knew about the processing stages of aluminum foil).

Only discussing parts of the certification standard:
Reynolds argued that plaintiffs lacked proof of a classwide definition of “made
in USA,” common evidence of consumer exposure to the label, and common evidence
of a price premium. But they had enough for certification on commonality and
predominance.

The Third Circuit still stands alone in its extreme ascertainability
rulings. The proposed class was comprised of all persons who purchased Reynolds
Wrap aluminum foil labeled with the words “FOIL MADE IN U.S.A.” in New York
from March 27, 2021, to the present, which was ascertainable “because the
putative class has been concretely identified by subject matter, timing, and
location.”

Plaintiffs had a common theory of deception. “Defendants
focus much of their analysis on whether or not Plaintiffs can prove materiality
and injury, rather than show whether these questions are common because they
may be determined on a classwide basis.” All class members would have been
exposed to the “FOIL MADE IN U.S.A.” label on the front of all aluminum foil
products. Common evidence was required to determine materiality to a reasonable
consumer.

And price premium injury was common injury; they proposed a
damages model consistent with their theory of liability. Plus, given that statutory
damages would be less than $50 or $500 here, most class members would opt for
statutory damages over actual damages. “Statutory damages can be assessed on
the basis of common proof,” creating a perfectly viable common damages model
even without the proposed conjoint analysis.

from Blogger https://tushnet.blogspot.com/2026/08/foiled-reynolds-must-face-made-in-usa.html

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Beats plausibly deceived consumers with Android feature claims

Posted on August 12, 2026 by rtushnet

Saucedo v. Beats Electronics, LLC, 2026 WL 2210908, No.
26-cv-01363-RFL (N.D. Cal. Jul. 31, 2026)

Saucedo’s
California claims against Beats partially survived for alleged
misrepresentations about the Android compatibility of its headphones. The
Amazon product page allegedly said, “Whether you’re on iOS or Android, you can
enjoy the same seamless compatibility.” The accompanying footnote did not
distinguish between features, saying only: “Requires an iCloud account and a
compatible Apple device running the latest operating system software or a
compatible Android device running the latest operating system software with
Google Play Services enabled.” The Amazon page also claimed “Personalized
Spatial Audio with dynamic head tracking” as a feature of the headphones, without
any qualifier about its availability on Android within the graphic or nearby
it.

 

“A reasonable consumer could plausibly read these
representations and be deceived into thinking Android users would be able to
use the Personalized Spatial Audio feature.”  Even if she should have looked beyond these,
deception was still plausible. Though a separate graphic about “Apple and
Android Compatibility” listed specific features that users could “[e]njoy,” it was
plausible that users would not understand that as an exclusive list of
cross-platform features. And one of the Frequently Asked Questions addresses
the Personalized Spatial Audio feature, but does not disclose that the feature
is unavailable on Android devices. It states:

Do my headphones have Spatial
Audio?

Beats Solo 4 has personalized
Spatial Audio with dynamic head tracking and uses built-in gyroscopes and
accelerometers to surround you with sound as you move, creating a truly
immersive listening experience on Apple platforms. You can customize your Spatial
Audio in your iOS settings by going to Settings > Personalized Spatial Audio
and following the on-screen instructions.

An “almost entirely illegible” disclaimer (which isn’t super
clear) didn’t help: “Compatible hardware and software required …. iPhone with
TrueDepth camera required to create a personal profile for Spatial Audio, which
will sync across Apple devices ….”

“disclaimer”

Plaintiff was granted leave to amend to add allegations that
she might repurchase the headphones because she might “reasonably, but
incorrectly, assume the product was improved.” “It seems possible that Saucedo
could plausibly allege that given the rapid pace at which technology develops,”
so the request for injunctive relief was dismissed with leave to amend.

 

from Blogger https://tushnet.blogspot.com/2026/08/beats-plausibly-deceived-consumers-with.html

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insurer can’t use “promotional event” exclusion to avoid coverage for recurring club nights

Posted on August 11, 2026 by rtushnet

Acosta v. Clear Blue Specialty Ins. Co., 2026 WL 2093910,
No. CV-24-03681-PHX-DJH (D. Ariz. Jul. 21, 2026)

Plaintiffs are models trying to recover for claims resolved
by consent judgment in their underlying lawsuit, one of the many against adult
clubs around the country.

In various social media posts, the insured used plaintiffs’
images to advertise club events, such as “Champagne Saturdays,” “Latin Ladies
Night,” “Working Man Specials,” and “2 por 1 Martes.” Plaintiffs claim that
their injury constituted a “personal and advertising injury” under the policy.

But the Policy excludes coverage of “personal and
advertising injury” that arises out of “exhibitions and related marketing,”
defined as:

(a) The creation, production,
publication, performance, exhibition, distribution or exploitation of motion
pictures, television programs, commercials, web or internet productions,
theatrical shows, sporting events, music, promotional events, celebrity image
or likeness, literary works, and similar productions or work, in any medium
including videos, phonographic recordings, tapes, compact discs, DVDs, memory
cards, electronic software or media, books, magazines, social media, webcasts
and web sites.

(b) The conduct of individuals in
shows, theatrical productions, concerts, sporting events, or any other form of
exhibition.

(c) Merchandising, advertising or
publicity programs or material for the operations and material described in (a)
or (b) above.

Plaintiffs argued that a “promotional event” is not “a party
at a nightclub but rather an ‘event’ thrown in furtherance of promoting
something…”

The insurance company responded contested images were
advertisements for “promotional events” as the events advertised “were not
ordinary nightclub evenings.” They touted “drink specials, free admission for
women, reduced dance pricing, and other deals.”

The policy didn’t further define “promotional event,” so the
court analyzed the terms of the policy as written and from the “viewpoint of
one untrained in law or in the insurance business.” Sampedro v. Clear Blue
Specialty Insurance Company, 2026 WL 1291919 (M.D. Fla. May 12, 2026), held
that the same exclusion unambiguously excused the insurer from defending the
nightclub in a similar case involving ads for “the ‘Pretty Chicks & Kicks’
and ‘Tastee Tuesday’ events.” The court reasoned that, even under such a
definition, “[the nightclub’s] promotional events promoted the nightclub itself
through alcohol sales and DJ appearances.”

Nobriga v. Clear Blue Specialty Insurance Company, 2026 WL
1998727 (D. Conn. July 10, 2026), used dictionary definitions to define a
“promotional event” as “a noteworthy happening or social occasion or activity
serving the means of furthering the growth or development of something,
particularly the acceptance and sale of merchandise through advertising,
publicity, or discounting.” Based on this definition, ads for the café’s “Cinco
de Mayo Party,” “Halloween and St. Patrick’s Day parties,” and “Baseball Night”
constituted advertisements for “promotional events.” “[E]ach advertisement
offered discounts on food and entertainment with the goal of bringing
additional customers through [the café’s] doors, and tied such discounts to
specific holidays or themed nights such as baseball night” making them
“advertising” for “promotional events.”

The court agreed that a “promotional event” need not be in
furtherance of something other than a business itself. But it thought that the
common understanding of “promotional event” wasn’t broad enough to encompass
“every promotion put in place by a business.” While holiday parties qualify as
“promotional events,” the same couldn’t be said for ads “tied to…a recurring
weekly promotion[,]” such as “Baseball Night.”

Here, some of the events advertised seemingly occurred on
the same day each week or at a defined time every day. Those were “a routine
part of” the insured’s business, not a “noteworthy happening” or “social
occasion,” and were untethered to anything but the promotions themselves. There
was no special food; “merely offering drink and dance specials does not
definitively transform a promotion into a promotional event,” nor did giving
the promotion a title. “The lack of ties to a special occasion or specific occurrence”
made the exclusion inapplicable. “To rule otherwise would require reading the
word ‘event’ out of the phrase ‘promotional event.’”

The court also rejected the insurer’s argument for judgment
on the pleadings that the exclusion applied because the underlying litigation
arose out of the publication of a celebrity image or likeness. But not all
recognized models are “celebrities.” More facts were required.

Clear Blue Specialty Ins. Co. v. 05 Petete, Inc., 2026 WL
2196263, No. 26-1891 (E.D. Pa. Jul. 29, 2026)

Similar result here on the same language. One underlying
plaintiff pled herself out of coverage by pleading that she was a “social media
celebrity,” but the others didn’t. “Being well-known in one’s profession or
endeavors does not by itself raise one’s status to the level of a celebrity.”

As for the promotional events exclusion, “Contrabando’s
High-Voltage Wednesdays,” “Exclusive Fridays,” “Matinee Sundays,” and “Euphoric
Saturdays” were “certainly promoting Euphoria’s nightclub itself and are using
the images of plaintiffs to do so.” But the ads were

merely encouraging the presence of
patrons on Wednesdays, Fridays, Saturdays and Sundays generally and are not
pointing to any Wednesday, Friday, Saturday or Sunday in particular. It is the
standard business of a nightclub to sell liquor to its clientele and to provide
musical entertainment. The offer of reduced prices from time to time is a
standard business practice to entice customers. The reduced prices are not tied
to a specific event or events but are in place for all Wednesdays, Fridays,
Saturdays, and Sundays.

“While the World Series is an event, the baseball season is
not an event. Likewise, while the grand opening of Euphoria’s nightclub or the
opening of any business would be an event, its continual and regular day-to-day
operation is not in ordinary parlance deemed to be an event or series of
events. Such operation may continue for years.” Thus, the ambiguous policy
language was construed against the drafter/insurer and it had a duty to defend
against three of the underlying plaintiffs’ claims, and thus a duty to defend
in the underlying lawsuit.

from Blogger https://tushnet.blogspot.com/2026/08/insurer-cant-use-promotional-event.html

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executive liable for false advertising can’t be made to disgorge salary, 9th Circuit rules

Posted on August 11, 2026 by rtushnet

Multiple Energy Technologies, LLC v. Casden, 2026 WL 2196259,
No. 24-4691, — F.4th —- (9th Cir. Jul. 30, 2026)

The parties compete in the market for “bioceramic” athletic
wear components that are supposed to enhance the wearer’s circulation, support
muscle recovery, and provide other health benefits. This case “asks whether an
officer of a corporation can be sued for tortious interference of contract when
he is found to have induced the corporation to breach a contract.” Normally, an
agent acting on behalf of a principal is immune from that kind of to avoid
double recovery from the principal (for the breach) and the agent (for
interference). There’s an exception when “the supposed agent acts not for and
on behalf of his principal, but … to benefit himself at the expense of his
principal.” The court applied those principles: it was not enough to avoid immunity
that the agent benefited by inducing a breach (e.g., he got a bonus for sales
goals) as long as he was also seeking to advance the company’s interests.

The district court also awarded disgorgement and attorney’s
fees for a separate claim brought by the plaintiff under the Lanham Act; the
disgorgement was also reversed.

In 2019, MET sued Hologenix for falsely advertising its
product, Celliant, as being FDA-approved. The parties settled with Hologenix
agreeing to pay $2.5 million (in installments) and to refrain from representing
that its product was FDA-approved or that the FDA determined that it has health
benefits. Before Hologenix made all its payments, though, it filed for
bankruptcy.

MET then sued Hologenix’s CEO, Casden. Hologenix allegedly continued
to represent that the FDA determined that Celliant has health
benefits—representations that Casden approved or made himself—in violation of
the settlement agreement. MET alleged tortious interference with Hologenix’s
performance of the settlement agreement (including by voting to file for
bankruptcy) and violation of the Lanham Act.

The district court found no immunity for Casden, stating
that he “was eligible for a bonus of up to fifty percent of his base salary per
year based on Hologenix’s business performance” and “[t]hus, by falsely
promoting Celliant, Casden positioned himself to gain personally.” A jury’s
“advisory finding” was that “Casden acted to advance his own personal interests
at the time he interfered with the Settlement Agreement,” although the jury
also found that he was “acting in his official capacity on behalf of
Hologenix.” It awarded MET $2.5 million in damages for the
tortious-interference claim.

The jury also returned a verdict in MET’s favor on its
false-advertising claim under the Lanham Act and awarded nominal damages of one
dollar. The district court then awarded MET disgorgement of Casden’s salary
earned from 2020 through 2023, trebled that amount, and also awarded attorney’s
fees of nearly $600,000 under the Act. The total came to over $6 million.

I won’t say much about the rather straightforward agency law
issue with tortious interference. “Where an employee acts within the scope of
his employment, it does not matter whether his conduct in inducing the breach
of contract was motivated by ‘ill-will or malice on his part.’ ”

Lanham Act: The disgorgement ruling was erroneous. “Casden’s
salary is not his profits.” The statute says that, under the statute, to assess
“profits,” the plaintiff “shall be required to prove defendant’s sales only”
and the “defendant must prove all elements of cost or deduction claimed.” “But
MET failed to show that Casden had any sales.” Hologenix made sales, but it wasn’t
the defendant (citing Dewberry Group, Inc. v. Dewberry Engineers, Inc., 604
U.S. 321 (2025)). Without sales, no profits.

But the fee award survived. The jury found that Casden’s
representations concerning Celliant were “deliberately or intentionally false”
in violation of the Lanham Act, so there was no abuse of discretion.

from Blogger https://tushnet.blogspot.com/2026/08/executive-liable-for-false-advertising.html

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challenge to FTC’s substantiation requirement isn’t yet ripe

Posted on August 11, 2026 by rtushnet

Xlear, Inc. v. U.S. Fed. Trade Comm’n, 2026 WL 2150208, No.
2:25-cv-00484-DBB-CMR (D. Utah Jul. 27, 2026)

In 2021, the FTC brought a civil action against Xlear because
its COVID-19 claims allegedly lacked substantiation and violated the FTC Act. “Xlear
is a developer and manufacturer of xylitol-based hygiene products such as nasal
sprays, toothpastes, mouthwashes, and chewing gums that allegedly promote good
health and reduce the risk of disease.” Advertising its nasal spray as
effective for the prevention and treatment of COVID-19 allegedly violated
Sections 5 and 12 of the FTC Act, as well as the COVID-19 Consumer Protection
Act of 2021. In March 2025, the enforcement action was dismissed with
prejudice.

Not satisfied, Xlear sued, seeking a declaratory judgment
under the APA that Sections 5 and 12 of the FTC Act “do not and cannot impose
an affirmative burden of substantiation on regulated parties.” It alleged that
its xylitol-based hygiene products are effective “against various pathogens,”
yet fear of the likelihood of future FTC enforcement allegedly prevents Xlear
from taking steps to advertise its products’ benefits, including protection
against COVID-19, which it alleges “remains a serious health risk” to
Americans. It argued that precedent upholding the FTC’s substantiation
requirement is no longer good law under Loper Bright Enterprises v. Raimondo,
and that the requirement chills Xlear’s First Amendment speech rights and
violates its Equal Protection rights by allegedly shifting the burden of proof
to defendants to show that their advertising claims are substantiated. [I’ve been
waiting for this argument for a while.]

The claims weren’t ripe. “Here, Xlear cannot point to a
definitive position the FTC has taken on advertising claims it has yet to
make—let alone one that inflicts an actual, concrete injury—because whether an
advertisement is deceptive turns on its content, making it a fact-specific
inquiry.”

Xlear argued that it was making a facial challenge. To win
such a challenge, Xlear needed to show that Sections 5 and 12 of the FTC Act
never require a health claim to be substantiated. It didn’t. Loper Bright didn’t
matter because “the court is not interpreting the statute, much less deferring
to agency action. Rather, the court is determining the ripeness of the case and
addressing the standard for a successful facial challenge.”

Xlear also argued that the FTC has taken a definitive
position/final action by highlighting the substantiation requirement going back
to 1984. But the “distinction between ‘general statements of policy’ and
‘rules’ is critical” because “ ‘general statements of policy’ … neither
determine rights or obligations nor occasion legal consequences.” An agency’s
“policy statements ‘do not establish a binding norm—or in other words, do not
have the force and effect of law.” Nor can they be “enforced against parties”
or “expose them to civil and criminal liability.” “Thus, even if the court were
to agree that the substantiation requirement represents the FTC’s definitive
statement of its position under the first prong of the final agency action
test, the requirement still fails under the second prong because the FTC’s
substantiation requirement does not determine the rights and obligations of the
parties.”

I wonder what the Texas district court hearing the
gender-affirming care cases thinks about this argument, since it is very much
ripe there.

from Blogger https://tushnet.blogspot.com/2026/08/challenge-to-ftcs-substantiation.html

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always plead a first use date: court struggles with famous foreign marks doctrine without it

Posted on August 11, 2026 by rtushnet

Teng v. Tao, No. 2:25-cv-05360-WLH-AJR, 2026 WL 2055494
(C.D. Cal. Jun. 5, 2026)

Teng sued Tao for various trademark-related claims. Teng is
allegedly the chairman of Plaintiff Heilongjiang Tang Huo Kung Fu Catering Co.,
a Chinese company that operates restaurant businesses abroad. The Tang Huo Kung
Fu brand allegedly operates widely in Asia, including in China and South Korea
and has received various awards and media recognition, under these marks:

Teng alleged that overseas reputation has created
recognition of their marks among certain U.S. consumer communities,
particularly in Asian communities in the United States, such as in Los Angeles
(specifically Los Angeles’ Koreatown) and Berkeley, California, but alleged no
first use in US commerce, though it did allege that, when Tao filed to register
at the USPTO in 2019, it had already existed for 11 years with nearly 300
restaurants in China and 150 restaurants in South Korea, among other locations.
Teng did not allege first use in the US or anything more than an application to
register in the US, which was abandoned.

Defendants operate at least one restaurant in California
using the name “TANG HUO KUNG FU SPICY HOT POT.” Defendant Tao Jin secured a
registration for its word + design mark in July 2020.

The court concluded that plaintiffs didn’t, and apparently couldn’t,
allege a valid ownership interest in the mark at issue. They claimed that the
famous mark exception applied under Grupo Gigante (whose logic I don’t think
survives Abitron, but the Fourth Circuit’s Belmora workaround probably
does).

Under Grupo Gigante, “where the mark has not before
been used in the American market, the court must be satisfied, by a
preponderance of the evidence, that a substantial percentage of consumers in
the relevant American market is familiar with the foreign mark.” “At this
stage, the Court is persuaded that Plaintiffs have sufficiently alleged the
necessary level of consumer recognition necessary to invoke the famous mark
exception to the territoriality principle with respect to the market in which
Defendants use the mark.” (That is, Berkeley and LA’s Koreatown.) But they
needed to replead to actually allege a date of first use (which was also key to
their cybersquatting claim).

False association: §43(a) doesn’t explicitly require
ownership (citing Blinded Veterans). Thus plaintiffs sufficiently pled a
claim. (Query: suppose they’re the junior user, full stop—if ownership isn’t required
for a §43(a) claim, why can’t big entrants use reverse confusion to eliminate small
senior users? Is your answer “causation”? Is your answer that this wouldn’t
work because the small senior user could assert a counterclaim? But, if there’s
no registration, how would a §43(a) counterclaim be resolved except by using
ownership priority rules? Abandoning a separate concept of unfair competition has
caused many such puzzles.)

Anyway, plaintiffs sufficiently pled confusion, e.g., a post
on Red Note that a customer was disappointed in the quality of defendants’
food, apparently attributing the failure to Tang Huo Kung Fu.

Puzzlingly, the court held that the inability to make a
trademark infringement claim also meant there was no actionable statement under
California’s FAL, despite the survival of the false designation of origin
claim.

Cancellation of registration: Fraud requires pleading with particularity.
“Fraud in procuring a trademark registration or renewal occurs when an
applicant knowingly makes false, material representations of fact in connection
with his application.” “Plaintiffs’ insufficient allegations of foreign fame
and diaspora recognition do not establish U.S. use or ownership. Without a
plausible allegation that Plaintiffs possessed superior U.S. rights at the time
of the trademark application, Plaintiffs cannot demonstrate that any USPTO
statement about ownership or others’ rights was false, much less knowingly
false.” (Plaintiffs’ counsel really needs to use Belmora to replead.)
Nor did they allege facts demonstrating that any specific USPTO submission was
actually false, material or made with an intent to deceive.

They also sought cancellation on §2(a) false affiliation grounds.
Under Belmora, “[t]o determine if a petitioner falls within the
protected zone of interests, we note that § 14(3) pertains to the same conduct
targeted by § 43(a) false association actions—using marks so as to misrepresent
the source of goods.” That worked here for services, too, at the pleading
stage.

from Blogger https://tushnet.blogspot.com/2026/08/always-plead-first-use-date-court.html

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Chobani’s “zero sugar” yogurt with allulose violates FDA regs despite FDA’s nonenforcement; 7th Circuit reverses preemption ruling

Posted on August 10, 2026 by rtushnet

Franco v. Chobani, LLC, No. 25-2087 (7th Cir. Jul. 27, 2026)

Federal law requires that foods advertised as sugar free
contain less than a half gram of sugar. Chobani sold Chobani Zero Sugar Yogurt,
but it included four grams per serving of allulose, a naturally occurring
sweetener. If allulose is a sugar under federal law, Franco’s state law false
advertising claims could proceed, but if it wasn’t, then there was express
preemption because federal law doesn’t allow states to impose additional requirements
on food labeling regulated by the FDCA. The district court, deferring to FDA enforcement
guidance, found preemption. The court of appeals reversed, finding allulose to
be a sugar under the regulation.

The relevant regulation defines “[t]otal sugars” as “the sum
of all free mono- and di-saccharides (such as glucose, fructose, lactose, and
sucrose).” And a food may not be labeled “sugar free” or “zero sugar” (or similar
terms) unless it “contains less than 0.5 g of sugars, as defined by [the
previous regulation]” and meets other requirements.

Hello, Loper Bright! “Interpreting the law is a job
for the court,” though the court isn’t required to ignore the FDA’s perspective
about the meaning of its regulations, and deference to agency interpretation of
an ambiguous rule “can be appropriate.” The FDA has several times expressed a
view: in 2016, it observed that “the final rule does not reach a decision as to
whether Allulose should be excluded from the [definition] of sugar[] … , and
Allulose, as a mono-saccharide, must be included in the [Total Sugars] declaration
… pending any future rulemaking that would otherwise exclude this substance
from the declaration.” In 2020, it issued industry guidance advising “manufacturers
of [FDA’s] intent to exercise enforcement discretion for the exclusion of
allulose from the amount of ‘Total Sugars’ and ‘Added Sugars’ declared on the
label … pending review of the issues in a rulemaking.” (The issue appears to be
that the FDA traditionally used chemical structure to identify sugars, but
novel sugars might also count depending on factors such as an association with
dental caries and how they are metabolized in the body.)

No further rulemaking has occurred, but the court of appeals
called for the views of the FDA. In its resulting amicus brief, the agency took
the position that total sugars as defined in that regulation include all
monosaccharides, including allulose. The “such as” parenthetical at the end of the
regulation was “merely a list of non-exhaustive, illustrative examples, and not
(as the district court found) a limitation on sugars based on the physiological
characteristics that the listed sub-stances shared.” And an enforcement
position isn’t an interpretation of a regulation. The court of appeals found
this persuasive. “There’s no dispute that allulose is a monosaccharide. Because
the definition includes every monosaccharide and the following parenthetical is
merely a list of examples, allulose is a sugar.”

The surplusage and noscitur a sociis canons didn’t change
anything. Chobani argued that a “sugar” needed the same nutritional characteristics
as glucose, fructose, lactose, and sucrose. The surplusage canon suggested that
the “such as” parenthetical should have some meaning, but redundancy is common
in the law, and “such as” doesn’t always mean “of the same kind”;  it can merely introduce “examples of a class.”
“The FDA defined a class by way of chemistry; it reinforced that definition
through examples, all of which share the same chemical structure.” There’s no
need to derive a definition from the list of examples, since they merely
illustrate the definition that already appears. Nor did Chobani argue that a
definition of sugars that includes all monosaccharides will lead to absurd
results. “And in defining total sugars, the FDA specifically invoked the
language of chemistry, which means decisions favoring common parlance meanings
aren’t persuasive, either.” The FDA could have defined total sugars based on
physiological factors, rather than chemical makeup, but it didn’t do so.

The regulation wasn’t ambiguous, so there was no reason to
defer to the FDA’s enforcement guidance, which wasn’t an official position
anyway.

What about the marketing permit Chobani secured from the
FDA? “[T]he fact that one sovereign (the United States) indicated that it would
not enforce its labeling requirements with respect to allulose should not have
led Chobani to believe that the states would take a similar approach.
Similarly, … the agency’s marketing permit said nothing about state law consumer
protection suits. Chobani is a sophisticated actor and should have been aware
that the FDA’s decisions about its enforcement priorities would not immunize
the company from suits based on state law.”

Chobani’s additional preemption theory based on Monsanto Co.
v. Durnell, 609 U.S. —, 2026 WL 1825691 (June 25, 2026), could be handled on
remand by the district court.

Deception was also plausible. Chobani argued that consumers
don’t care about the existence of monosaccharides in their food but are instead
concerned with avoiding the ad-verse health consequences associated with
traditional sugars. “Whether reasonable consumers care about the existence of
allulose in their yogurt isn’t the same thing as asking whether reasonable
consumers would be deceived by it.” Discovery was the right next step.

from Blogger https://tushnet.blogspot.com/2026/08/chobanis-zero-sugar-yogurt-with.html

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false advertising in online games leads to over $700 million award to competitor

Posted on August 10, 2026 by rtushnet

Skillz Platform Inc. v. Papaya Gaming, Ltd., 2026 WL 2151126,
No. 24cv1646 (DLC) (S.D.N.Y. Jul. 27, 2026)

Some
previous opinions
(more linked there). At a jury trial, Skillz won a substantial damage award for
false advertising about Papaya’s use of bots in the real money skill-based
mobile gaming (RMSB) market. The court here rejected Papaya’s post-trial
motions and Skillz was awarded $719 million plus its attorney’s fees for the
years 2024 and 2025 and certain costs.

“Skillz created the first RMSB platform in 2012. Papaya
entered this market in 2019 and quickly took a significant market share.” In the
light most favorable to Skillz, the evidence at trial showed significant
barriers to entry in this market, because a successful platform “needs a
customer base large enough to match players of similar or comparable skill in
tournaments within a reasonable amount of time,” aka liquidity. Skillz
maintains that its tournaments are games of skill, not chance, and thus not gambling;
it was required to and did represent to app stores, payment processors, and
advertising hosts that it was not engaged in gambling and that the outcome of
its tournaments was determined by the skill of the players.

Then, Papaya

decided to enter the RMSB market in
2019 by deceiving the public and others about the nature of its product.
Instead of running tournaments in which the players who had paid entry fees
competed against each other, Papaya decided to solve the problem of building
liquidity by running tournaments in which multiple participants were not other
human players but were instead “bots.” Papaya’s bots were essentially scores
designated by Papaya’s algorithms; they were not artificially intelligent
players. In these tournaments, a player’s score was compared to the scores
Papaya assigned to its bots. In this way, Papaya was always able to run a
tournament, including tournaments with what appeared to be a dozen or more
participants, at any time of night or day. Papaya gave its bots usernames and
profiles to make them appear to be individual customers.

Papaya used liquidity bots to create immediately accessible
tournaments of up to 20 or more “players,” permitting a player in a Papaya game
to learn quickly whether he had won or lost a tournament, “thereby increasing
the odds that he would pay to enter another Papaya tournament.” It also used “tailored”
win/loss bots so that a player who had a losing streak could be given a “win”
to motivate them to keep playing in more tournaments. Tailored bots operated in
over 630 million Papaya tournaments, or in roughly one-quarter of the 2.6
billion tournaments that Papaya hosted 2021-2024. During that period, “bots
accounted for over 13 million of the participants on Papaya’s platform,
compared to about 11 million human players.” Over half of humans played in at
least one tournament where tailored bots were designed to give them a loss, and
more than 7.3 million played in tournaments with tailored bots designed to give
them a win.

Unsurprisingly, Papaya’s bots were used most heavily in the
initial phases, when it needed to build liquidity, about 90% of the time in
2021. “Because of its use of bots, Papaya only paid customers roughly $2
billion of the $6.7 billion that it advertised had been awarded in prizes. And
just before Papaya stopped using bots near the end of 2023, Papaya was still
using bots in roughly 50% of its cash tournaments.” Papaya “achieved a
substantial presence in the RMSB market while investing only a fraction of the
money expended by Skillz to do so. When seeking investors, it bragged about its
strategy” of multiple-player tournaments, “unique” platform capabilities, and revenue
growth “8 times more than the industry leaders.”

Papaya never disclosed its use of bots, but purposely
advertised falsely that its games were “fair” and “skill-based,” that it has
“no vested interest” in who wins or loses a tournament, and “described the
participants in its tournaments with pictures and in terms that apply to human
players.” When players complained, Papaya denied using bots, at the direction of
executives.

Papaya made similar misrepresentations to app stores, its
payment processers, and its advertising channels.

Papaya did not stop using bots until late 2023, at which
point Skillz’s revenue had fallen by 60% in just two years: from $384 million to
$152 million, “while Papaya’s revenue skyrocketed from $163 million to $461
million over the same period.”

Given the “overwhelming” evidence of intentional false
advertising, the parties principally litigated damages before the jury, and
also the court sought an advisory verdict on disgorgement. The jury was
instructed that “Skillz is not entitled to duplicative monetary recoveries and
the Court will ensure that Skillz only recovers once for any injury it has
shown it suffered.”

The jury awarded Skillz $420 million in damages, or
two-thirds of the requested amount, and an advisory disgorgement verdict of
$719 million for Papaya’s unjust profits and $652 million for Papaya’s unfair
cost savings (in acquiring users through fake liquidity).

Papaya argued that Skillz’s damages expert improperly relied
on a but-for world in which Papaya did not use bots and its advertising
statements were true, making its expenses greater and its profits lower because
it did not rely on bots to build its business. Papaya argued that the expert
was required to model a different but-for world, “specifically one in which
Papaya removed all false statements from its advertising while not altering its
business model or its use of bots.” But Papaya didn’t explain how this could be
done: “Skillz proved at trial that Papaya could not have entered the RMSB
market by using bots in the way that Papaya did … and at the same time
truthfully describe that use and its product to consumers in its advertising.
Papaya has offered no authority to suggest that a plaintiff’s expert must
create a but-for world that could not exist.” Among other things, payment
processors and others wouldn’t have allowed Papaya to use their services had
Papaya told the truth, and consumers wouldn’t have wanted to play against bots.

Given these constraints, Skillz showed that the damages “flowed
directly from Papaya’s false advertising,” which “concerned the very nature of
the product; it was not a false statement about some incidental feature. And
Skillz showed that it was that very advertising that caused consumers to complain
to Papaya about Papaya’s use of bots.”

It was also acceptable to award damages for lost enterprise value
as long as the damages were measurable with reasonable certainty. Papaya argued
that Skillz could only recover its lost profits, but Skillz hadn’t yet made a
profit at the time of trial; “Papaya argues that Skillz cannot recover
enterprise value damages simply because Skillz prioritized growth over profits
in the years it was developing its business.” Yes, Skillz “invested heavily in
developing its business and enlarging its customer base to achieve not only
substantial liquidity but also a network effect,” but that didn’t limit it to
lost profits instead of lost enterprise value.

Nor was Papaya entitled to JMOL on the Lanham Act and NY GBL
claims: falsity, materiality, and harm were all sufficiently shown. Among other
things, “there was abundant evidence that Papaya engaged in deliberate conduct ‘of
an egregious nature’ to deceive consumers, which created a presumption of
deception.”

The court additionally rejected Papaya’s argument that damages
under the GBL must be limited to financial harm that resulted from Papaya’s
deception of New York consumers. As a competitor suing for the effects of
consumer deception on it, “Skillz is entitled to be fully compensated for the
injury it incurred through Papaya’s wrongdoing even though that injury also
impacted consumers who resided outside New York.”

The court also rejected Papaya’s other challenges to the
amount of damages. The amount of the award didn’t shock the conscience when
measured against the legal standard and the trial evidence. “Skillz and Papaya
were competing with each other in a new online industry where billions of
dollars in revenue were available to the successful RMSB company. Papaya’s
fraudulent conduct was extraordinary” and central to its huge success/zero-sum
impact on Skillz.

Among other things, it was ok to use evidence of Papaya’s
success after it stopped using bots: “There was credible evidence at trial that
Papaya benefitted from the network effects of its false advertising even after
Papaya ceased using bots to fill and control tournaments.” Thus, the damages
model could include Papaya’s revenue from running tournaments for the player
base that it had built while engaging in false advertising.  Papaya’s own damages expert testified that the
number of Papaya’s tournaments fell only 20% after it turned off the bots, “suggesting
that Papaya continued to benefit from the liquidity it had built through its
false advertising.”

Skillz requested that the court double the jury’s advisory
verdict of $719 million on Papaya’s profits (the jury also identified $652
million as Papaya’s cost savings), or treble the $420 million damages award.
The court declined both requests for enhanced damages, but did award $719
million.

Disgorgement was appropriate because, come on. Skillz didn’t
show that disgorgement was necessary to deter Papaya, since it largely ceased its
false advertising in late 2023 by discontinuing the use of bots in its
tournaments, “and there is no realistic possibility that Papaya will return to
its false advertising campaign now that the unlawful advertising has been
publicly revealed and addressed in this judgment.” The key was unjust
enrichment: “Papaya’s relatively modest financial investment in its start-up
business did not explain its explosive growth …. Even large, deep-pocketed U.S.
companies that had contemplated entering the market to compete with Skillz,
which had already achieved a network effect, decided against doing so.” The
award of Skillz’ loss of enterprise value didn’t fully deprive Papaya of the
benefits of its illegal scheme. “Papaya is still a substantial player in the
market and, because players tend to stay on a platform with which they are
familiar, the impact on Skillz of Papaya’s wrongdoing will continue for the
foreseeable future.”

Nor did Skillz delay unreasonably: “While Skillz came to
suspect and then believe in 2023 that Papaya’s success was due to its false
advertising and employment of bots, Skillz was entitled to sufficient time to
develop the reasonable grounds necessary to plead its claim in federal court in
early 2024. Since that filing, Skillz has proceeded with diligence to prosecute
this lawsuit, despite Papaya’s strategy of making Skillz’s assembly of the
proof of its claims difficult and expensive.”

However, if no disgorgement award were available, the court
would enhance the actual damages award by doubling it to $840 million, because
the actual damage to Skillz was “severe but hard to quantify,” especially given
that Skillz made changes in response to Papaya’s false advertising.  

Papaya also argued that any disgorgement amount should be
reduced by 13% to remove non-U.S. revenue, because the Lanham Act is not
extraterritorial. But Papaya’s audited financial statements, introduced at
trial, did not disaggregate U.S. sales from foreign sales. Papaya relied for
its 13% number on a single graphic in a January 2023 PowerPoint presentation
prepared by a third-party for Papaya, apparently to entice investors, while it
was still engaged in false advertising in the United States. The presentation
disclaimed being an “audit or due-diligence review”; it warned that the author
does not give “any representation or warranty, express of implied, as to the
accuracy or completeness of the information” in the document.

The court declined to adjust the figure. The US was
undisputedly Papaya’s target market, and  “Papaya denied Skillz access during the
discovery period to relevant information that Skillz sought, including the
information that would permit Skillz to accept the representation in this
graphic, to dispute it, or to place it in context.” On this record, there was
no need to adjust disgorgement, which after all need not be proven to
perfection.

Unsurprisingly, the court also partially granted Skillz’s
requests for attorneys’ fees, costs, and post-judgment interest, but not pre-judgment
interest. The case was exceptional (the Lanham Act standard) and the court
exercised its discretion to award fees under the GBL. Ending the fee period at
the end of 2025 left roughly $10.1 million in fees. Along with the deliberate,
extensive, central deception, Papaya litigated the case unreasonably in 2024-2025,
when it “slow-walked and obstructed the production of critical discovery
material through the entire discovery period,” with ramifications through trial.
“For example, during the presentation of the defense case, Skillz learned for
the first time that Papaya had wrongfully redacted highly relevant passages
from its documents by marking the material ‘nonresponsive.” But “[t]his year,
Papaya changed counsel and the parties were largely involved in preparing for
the April trial. From any point of view, it was reasonable for Papaya to
litigate the amount to be awarded in damages and that was largely the focus of
the trial.”

No prejudgment interest because the attorneys’ fee award was
sufficient to address the exceptional nature of the case, and because the court
had already ordered disgorgement of Papaya’s unjust enrichment.

Skillz Platform Inc. v. Papaya Gaming, Ltd., 2026 WL 2185762,
No. 24cv1646 (DLC) (S.D.N.Y. Jul. 29, 2026)

The court also denied a permanent injunction. First, Skillz
sought an injunction against bot use; that was denied because it was false
advertising, not bot use as such, that was at issue.

Second, Skillz sought a 6-month corrective advertising “splash
screen” shown to each user prior to their playing any Papaya game or when they
enter the Papaya website, informing readers that Papaya once used bots, that it
denied their existence to customers, and that a jury found Papaya liable to
Skillz for false advertising. [Annoying all-caps presentation makes the
proposal unreadable.] Although Skillz suffered an irreparable injury that
monetary damages could only partially remedy, the public interest and the
balance of the equities didn’t weigh in favor of the proposal:

There is no adequate showing
regarding how many of those currently viewing the Papaya website or playing a
Papaya game were subjected to its false advertising. Papaya’s false advertising
ended in late 2023 with its removal of bots as tournament players. That is over
two years ago, which is probably an infinity in the online gaming world.
Moreover, the reference to Skillz in the proposed corrective advertising will
promote Skillz, which is only one of Papaya’s competitors. Finally, the burden
on a consumer of reading and reacting to the statement years after the events
at issues weighs against the requested relief.

from Blogger https://tushnet.blogspot.com/2026/08/false-advertising-in-online-games-leads.html

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