Placebo effect means customer satisfaction doesn’t disprove harm; suggestive TM can be fact claim

In re 5-hour ENERGY Marketing & Sales Practices Litig.,
No. MDL 13-2438, 2017 WL 385042 (C.D. Cal. Jan. 24, 2017)
Plaintiffs alleged that defendants engaged in deceptive and
unfair business practices under the laws of various states and the
Magnuson-Moss Warranty Act in selling 5-hour ENERGY, including  both representations on the 5HE packaging and
off of it.  On-label representations
include the product’s name and the claims to provide “five hours of energy” or
“hours of energy,” and “no crash.” These statements were allegedly misleading
because 5HE provides only a few minutes of energy, at most, and results in a
“crash” at the end of the five hours.  Plaintiffs alleged that they used 5HE for a
while—up to 1300 times for one plaintiff—before discontinuing use.
Defendants argued that the repeat purchases showed that
plaintiffs weren’t injured and that, after their first purchase, they couldn’t
have been deceived because they had personal experience with the product and no
longer required the statements on the packaging to understand the product’s
effects.  However, as a matter of law,
repeat purchase isn’t proof of lack of injury; injury is a matter for the jury.
 Federal Trade Commission v. Pantron I Corp.,
33 F.3d 1088, 1097 (9th Cir. 1994) (even if some consumers were satisfied and
became repeat purchasers, claims were false as a matter of law).  In particular, the Pantron court said, “Where, as here, a product’s effectiveness
arises solely as a result of the placebo effect, a representation that the
product is effective constitutes a ‘false advertisement’ even though some
consumers may experience positive results.” Or, as the court here says, “what
mattered most in a false advertising claim was not how consumers felt about the
product but what the product actually did.” The case law establishes that “evidence
of consumer satisfaction takes a backseat to scientific evidence showing that
the product’s claims are verifiably false.”
So too with defendants’ reliance argument based on
plaintiffs’ personal experiences.  Cases
accepting similar arguments concerned “items like a lipstick that promises
24-hour coverage or a ‘fresh’ orange juice—products where the consumer can
quickly tell whether the representations on the products’ packaging are true.”  But, as the lipstick case recognized, for
things like “dietary supplements”—exactly the issue here—it might be harder to
tell for some products.  [That is, 5HE is
at least partially a credence good, not an experience good.] Here, plaintiffs
testified that they weren’t sure or that they thought they should give the
product a chance.  “Although the Court is
skeptical that the Plaintiffs on the far end of the spectrum—those who
purchased 5HE several hundred times before discontinuing use—can state a false
advertising claim for their later purchases, Plaintiffs have raised a genuine
dispute of fact that at least some subsequent purchases satisfy the reliance
requirement.” A trier of fact should decide when the “reasonable consumer”
would learn of the efficacy of the product, especially given that “consumers
may operate for some time under a ‘placebo’ effect before realizing that the product
lacks efficacy.”
Although plaintiffs couldn’t plead the off-label representations
they relied on with sufficient specificity, the court found that some state
consumer protection laws didn’t impose reliance requirements, only exposure to
the misrepresentation: New York, New Jersey, and New Mexico don’t have
reliance.  So too with NJ and California
warranty law.  Defendants argued that
causation was still required, but “[t]o prove causation in a state that does
not impose a reliance requirement, the plaintiff need only prove that the
reasonable consumer is ‘likely to be deceived,’” which would be better decided
by the trier of fact.
Courts have required that a “written warranty” under the Magnuson-Moss
Warranty Act reference a “specified period of time” in order to be actionable. Plaintiffs
argued that the 5HE trademark, the “five hours of energy,” and the “no crash”
statements qualified, but defendants argued that the 5HE trademark couldn’t be
the basis for an MMWA claim because it’s suggestive as a matter of law, not
descriptive, and “is used to indicate the source of goods, not to provide a
warranty to customers.”  The case law
holds that trademarks can be warranties. 
The Sixth Circuit’s conclusion that the trademark was suggestive rather
than descriptive had “little relevance.” 
“It is unclear to the Court why trademark classifications should play
any role in determining whether the trademark constituted a ‘written promise’
to consumers. As simple as it is, the 5HE trademark meets the standard required
by the MMWA.”

The court dismissed claims related to decaffeinated 5HE
packaging because none of the named plaintiffs had bought it.  Though the alleged misstatements on the
packaging were the same, the ingredients differed significantly—6 mg of
caffeine compared to 200 mg.  The
composition of the product would be very important to the issue of whether the
product provided “five hours of energy” and caused a “crash” at the end of the
five hours, and no remaining named plaintiff could testify about their
experiences with the decaffeinated product.

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