Why do competitors get to challenge claims that consumers don’t?

Posted on November 3, 2014 by rtushnet
I have a political economy explanation for this, but I don’t think that’s good enough.  Challenging a “tests prove” claim—explicit or implicit—in Lanham Act cases means showing that the tests don’t prove the proposition for which they are cited.  This is a standard path to explicit falsity, requiring no further evidence of deceptiveness.  But consumer protection cases often seem to ignore the point made by Lanham Act courts: when the defendant’s claim is “tests prove X,” showing that “tests don’t prove X” has falsified the defendant’s factual claim—and one very likely to be material, even if X might still be true for some other reason.  Defendants have proved more successful calling this a mere lack of substantiation claim when consumers are the plaintiffs.  That should not be the case.
Kwan v. SanMedica International, LLC, No. 14-cv-03287, 2014 WL 5494681 (N.D. Cal. Oct. 30, 2014) (magistrate judge)
Kwan sued SanMedica for its marketing of SeroVital, an over-the-counter supplement marketed to boost human growth hormone (“HGH”). Kwan identified these claims: (1) that SeroVital provides a 682% mean increase in HGH levels; (2) that SeroVital is clinically tested; and (3) that “peak growth hormone levels” are associated with “youthful skin integrity, lean musculature, elevated energy production, [and] adipose tissue distribution.”  She alleged that she relied on them to buy,  and that they violated the UCL/CLRA because in fact the clinical evidence didn’t support SanMedica’s claims.
Lack of substantiation isn’t a sufficient basis for a private claim under the UCL/CLRA (nor, I should note, is it under the Lanham Act, with the exception announced in the Mylanta Night Time Strength case in the 3d Circuit).  A claim is false if it has “actually been disproved,” “that is, if the plaintiff can point to evidence that directly conflicts with the claim.”  Merely lacking evidentiary support just makes it unsubstantiated.
Kwan alleged that (1) the only study supporting SanMedica’s representations did not test for “youthful skin integrity, lean musculature, elevated energy production, [and] adipose tissue distribution,” and (2) that study is so deeply flawed that it cannot serve as a reliable basis for SanMedica’s representations.
For the first claim, the ad didn’t claim that the clinical testing showed effects on “youthful skin integrity, lean musculature, elevated energy production, [and] adipose tissue distribution,” but merely said that peak growth hormone levels are associated with those benefits. So the fact that the study relied on in the ad didn’t test for those benefits was irrelevant.  (To misleadingness?)  For the second, that was just a lack of substantiation claim.  Other cases allowing similar claims to proceed involved affirmative evidence of falsity. 
Did this complaint allege any evidence that SanMedica’s claims were false?  Kwan alleged that the FTC had stated that no reliable evidence supported claims that non-prescription products have the same effect as prescription HGH; that the New England Journal of Medicine warned about the potential for misleading consumers; and that the FDA has stated that “it is unaware of any reliable evidence to support anti-aging claims for over-the-counter pills and sprays that supposedly contain HGH.” But none of that alleged falsity, especially since none of the authorities cited actually referred to SanMedica’s product.  (Why is that important if no such product will work?)  Also, most of the statements were old, from 11-20 years, and the court couldn’t tell whether they were made before SanMedica’s product came on the market, in which case they couldn’t refer to it.  (So if I make a new brand of milk, statements about the effects of dairy from before I enter the market can’t apply to me?)
However, Kwan could amend the complaint if she could in good faith allege facts affirmatively disproving SanMedica’s claims.  For example: she could alleged that someone actually studied or tested SanMedica’s formula and found that it didn’t produce a 682% mean increase in HGH levels, or that she herself did not experience such an increase when using the product, or that a study exists somewhere demonstrating that a 682% increase is categorically impossible to achieve in an over-the-counter pill.

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Might of publicity?

Posted on November 3, 2014 by rtushnet

Using Michelle Obama’s arms to sell training services:

Want Michelle Obama’s Arms? Or Better?! training flyer

H/T and photo by Zach Schrag.

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"we can do anything" ToS might be unconscionable, providing remedy for loss of music

Posted on November 3, 2014 by rtushnet
MacKinnon v. IMVU, Inc., No. H039236  (Cal. Ct. App. Oct. 30, 2014)
MacKinnon sued IMVU, which runs an entertainment service, the “instant messaging virtual universe,” alleging that IMVU deceived users about music purchases and wrongfully restricted users’ ability to play music after they bought it.  He alleged conversion, breach of contract, and negligent misrepresentation along with California statutory claims. The trial court dismissed all of his claims because IMVU’s contract said it could do whatever it wanted to its customers.  The court of appeals reversed.
To get the IMVU app, users have to provide information and click the “Create IMVU Account” button on IMVU’s website. Below that button is small print stating “[b]y clicking Create IMVU Account you are indicating that you have read and agree to the Terms of Service Agreement and Privacy Policy,” and a hyperlink to the Terms of Service Agreement and Privacy Policy.
IMVU users have avatars and can buy virtual products for them using real money.  They can also buy audio products, including “trigger music,” audio clips or songs users play by typing the appropriate trigger.  IMVU users create audio products and submit them to IMVU’s catalog; users can listen to the full product before buying it by clicking a “try” button.  After a purchase, a screen pops up displaying the product and the phrase “You own this.” IMVU’s site says that purchases are “available to be used whenever you like.”  The ToS, however, say that IMVU can do anything at any time, that users have no rights in anything they buy (called a “license” in the ToS, naturally), that purchases are nonrefundable.
In 2008, IMVU announced that, because of bandwidth issues, “new products submitted” to the virtual catalog would be “cut down to 20 seconds,” but that the restriction “will not affect products already in the catalog.”  In 2011, IMVU applied the 20 second limit to all audio products, including previously purchased ones, and said that refunds would be offered only for purchases made on or after December 1, 2010.  MacKinnon, however, had already spent hundreds of dollars on IMVU credits, and when he bought audio he sampled them using the “Try” button to make sure it was full length and not limited by the 20 second rule.
The court first found that the contract indeed said that IMVU could do whatever it wanted with respect to the files.  MacKinnon argued that this interpretation rendered the contract terms unconscionable.  Oppression and surprise are the relevant factors in procedural unconscionability.  As to oppression, the availability of alternative online social gaming platforms and the “nonessential nature” of the recreational activity made the degree of oppression low.  (This undercounts the stickiness of particular sites: the operator intends to become important to the consumer, and the consumer may find it very difficult to leave once s/he spends significant time on a platform because of the social connections there—given the relational nature of the service and the operator’s intent that the consumer become invested, this conclusion doesn’t make sense in the context of contracts that consumers just don’t read.)
As to surprise, the ToS was a 10-page, single-spaced document. The provision at issue appeared in the Terms and Conditions of Sale section, where the court said one would expect to find it (though note that it’s called “sale”), in the same typeface and font as most of the document.  So the agreement didn’t call special attention to the no-refund provision, but it wasn’t hidden in fine print. And length alone doesn’t establish surprise.  (In other words, we’re just going to pretend that consumers read these contracts; nothing to see here—literally nothing to see, since it was just a hyperlink.) Thus “we cannot say the element of surprise is present.”
As a result, the court of appeals concluded, there was a low degree of procedural unconscionability. Comment: Contrast empirical research on consumers’ practical ability to read and understand multiple pages of text, presented online, when they have to do that with every service they encounter.  See, e.g., Jeff Sovern  et al., “Whimsy Little Contracts” with Unexpected Consequences: An Empirical Analysis of Consumer Understanding of Arbitration Agreements. I’d say procedural unconscionability is routinely high.  That it might go higher in more concentrated markets doesn’t make it absolutely low. (Indeed, I’m not convinced consumers can figure out terms well enough to use differences to judge competitors and thus competitors will rarely if ever compete on contract terms and competitive markets will still be packed with unconscionable terms.)
Substantive unconscionability: contracts of adhesion are substnatively unconscionable when they’re overly harsh, unduly oppressive, so one-sided as to shock the conscience, or unfairly one-sided.  It’s not just a bad bargain, but a contract that’s unreasonably favorable to the more powerful party: there’s no justification for the contract’s one-sidedness, and the allocation of risks or costs is overly harsh given the circumstances. The court of appeals found that the record was insufficient to make that determination, which depends on a contract’s “commercial setting, purpose, and effect.”  Thus, the court of appeals considered whether the dismissal could be affirmed on other grounds.
CLRA: the complaint alleged that IMVU violated the CLRA by deceiving users into believing that full-length audio products would not be truncated and by including unconscionable provisions in the ToS.  MacKinnon pointed to (1) IMVU’s announcement that the 20-second restriction “will not affect products already in the catalog” and (2) the message “You own this” that users received after purchasing audio products. He alleged that these constituted representations that the goods at issue had characteristics or qualities they didn’t have; that IMVU had advertised goods/services with intent not to sell them as advertised; and that IMVU had represented “that a transaction confers or involves rights, remedies, or obligations which it does not have or involve,” as specifically barred by the CLRA.  (I like that last theory!  If online services insist that they aren’t making “sales,” they darn well ought to stop telling us that they are.)
A CLRA deceptive conduct claim requires conduct that was likely to mislead or deceive a reasonable consumer, which is usually a question of fact, and a causal connection between the defendant’s allegedly deceptive representation and the alleged harm—reliance.  IMVU argued that, in view of the ToS, no reasonable consumer was likely to be deceived.  But a factfinder could conclude otherwise based on the September 2008 announcement and the “You own this” representation.  Regardless of the ToS provision (which may or may not be enforceable), it was possible that reasonable consumers would be misled.  Even if the September 2008 announcement was true, true statements can be misleading.  “A reasonable consumer may have understood those representations to mean that IMVU would not exercise any contractual right to truncate certain audio products postpurchase.”  The CLRA makes consumer protection claims available when collateral representations differ from contractual language. 
And then the court of appeals muddies the waters by stating that “[w]hether a reasonable consumer who read the Terms of Service Agreement and the representations would have been misled by the latter is a question of fact.”  So reasonable consumers, as a matter of law, read the contract—and what is the level of understanding of such consumers?  Can they read at a twelfth-grade level?  Anyway, MacKinnon adequately alleged deceptive conduct. He also alleged reliance, at least as to the September 2008 announcement, which he alleged he reviewed; he never specifically alleged that the saw the “You own this” statement.  (Did he see the “buy” button?  Why wouldn’t “buy” indicate that he had “bought” the particular item he sought to buy?)  And MacKinnon didn’t show there was a reasonable possibility of curing the defect in the pleading by amendment.
The CLRA also allows unconscionability-based claims where an unconscionable provision in a contract is intended to result in or which does result in the sale or lease of goods or services to any consumer. MacKinnon couldn’t state a claim based on the class action waiver because IMVU hadn’t yet sought to enforce that term of the agreement against MacKinnon, so he hadn’t suffered any damage, but as to the unconscionability discussed above he did state a claim.
UCL fraud, FAL, and negligent misrepresentation claims also survived as to the September 2008 announcement.
Conversion: Conversion requires actual interference with ownership or right of possession.  IMVU argued that MacKinnon had no property rights in the audio products because of the ToS stating (1) “you acknowledge that you have no right, title or interest in or to this Site, any Products, Materials or Software”; and (2) “Credits” “can . . . be exchanged on this Site for limited license right(s) to use a feature of our Product or a virtual product when, as, and if allowed by IMVU and subject to the terms and conditions of these Terms.”
But the first provision was inapplicable, since IMVU carefully distinguished in the ToS between “Products” it offered and virtual products created by third party users (Submissions), which was what MacKinnon bought. And the second provision didn’t define the scope of the user’s license rights or whether they included any ownership interest. 
Breach of contract claims also survived based on MacKinnon’s acceptance of IMVU’s post-September 2008 offering of full-length audio products for purchase.  This claim wasn’t based on the ToS itself, but an alleged subsequent contract, so the claim was that the parties subsequently implicitly modified their integrated writing.
Also, a breach of the implied covenant of good faith and fair dealing was adequately pled, even though the ToS might expressly authorize truncating audio products. A discretionary power must still be exercised in good faith.  However, courts can’t imply a covenant directly at odds with a contract’s express grant of discretionary power “except in those relatively rare instances when reading the provision literally would, contrary to the parties’ clear intention, result in an unenforceable, illusory agreement.”  If the no-refund portion of the contract, which gives IMVU unfettered authority to truncate audio products without a refund, is enforceable, then no covenant of good faith and fair dealing could be implied; if it was unconscionable, then there was also a claim of a breach of the covenant.  (OK, I’m not a contracts person, but this seems … weird.  I thought the whole point of the covenant of good faith and fair dealing was to make contracting parties exercise their discretion within some boundaries, even when the contract provision at issue was valid.)
However, MacKinnon couldn’t bring a Song-Beverly Act breach of warranty claim because he didn’t buy the audio products in California, but rather in Utah where he resided.

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Insufficient deviation from FDA label and lack of materiality doom false ad claims

Posted on November 3, 2014 by rtushnet
Apotex Inc. v. Acorda Therapeutics, Inc., 2014 WL 5462547, No. 11 Civ. 8803 (S.D.N.Y. Oct. 23, 2014)
Zanaflex tablets and capsules (active ingredient tizanidine) are approved by the FDA to treat spasticity.  Somnolence is one of the most common side effects.  Apotex began selling a generic version of the tablets in 2004, and Acorda began selling Zanaflex capsules in 2005.  Tizanidine tablets and capsules aren’t bioequivalent when administered with food, and the differences might be clinically significant, including increased adverse events or delayed/faster onset of activity, for people switching between the two. Apotex sued Acorda for false advertising and related business torts. Acorda here won summary judgment.
The court began by noting that courts generally reject Lanham Act claims based on ads that merely repeat FDA-approved label information.  (Pom doesn’t even merit a mention.)  It then reviewed the various statements and images Apotex argued were false.
First, sales reps told doctors that Cmax (maximum blood concentration of a drug after dosing) was reduced when Zanaflex was taken with food.  But this was consistent with the FDA label, which said that  “the mean Cmax for the capsule when administered with food is approximately 2/3’s the Cmax for the tablet when administered with food.”
Second, sales reps told doctors that, when taken with food, Zanaflex capsules cause less somnolence than Zanaflex tablets.  The court rejected Acorda’s argument that these statements were unauthorized and isolated and thus couldn’t be the basis of liability, because they weren’t part of an organized campaign.  A reasonable juror could find otherwise.  Acorda also argued that a pharmaceutical company shouldn’t be held liable when it didn’t instruct the reps to make the statements and, after learning of them, reinforced company policy and made good faith compliance efforts.  That was a factual determination the court wasn’t willing to make on a summary judgment motion.
However, a reasonable juror couldn’t find these statements to be false.  Apotex argued that all it need to show was that the challenged statements weren’t supported by statistically significant evidence. When an ad explicitly or implicitly represents that its claims are test-backed, falsity can come from showing that the tests didn’t establish the proposition for which they were cited, including by showing that the tests weren’t sufficiently reliable.  But none of the statements about somnolence here were claims of test-proven superiority.  “At most, the statements suggest that, due to pharmacokinetic differences between the products, Zanaflex capsules cause less somnolence than Zanaflex tablets when taken with food.”  (Why wouldn’t reasonable doctors assume that there was actual evidence behind this, since the claim involves a scientific method of action?)  True, some of the challegned statements referred to a graph of pharmokinetic differences, but the graph seemed to be the one featured on the FDA label and there was no indication that the sales reps told doctors that the graph showed somnolence levels.  Encouraging doctors to draw an inference not directly supported by the graph was at most misleading, not false.  At most, Apotex showed lack of substantiation, not falsity.
Third, Acorda’s promotional materials said that taking Zanaflex tablets with food increases Cmax by 30%, whereas taking Zanaflex capsules with food decreases Cmax by 20%.  Again, this was consistent with the FDA-approved label; omitting “approximately” wasn’t enough to make the claim false. 
However, juxtaposing this claim with a graph of of mean tizanidine plasma concentration curves over time could create a literally false message, since mean plasma concentration over time is different from Cmax (the highest level, at whatever time it occurs).  Identifying the highest points on the graph as a “30% Increase for Tablets” and “20% Decrease for Capsules” unambiguously claimed that mean concentration increased that much/decreased that much when the drugs were taken with food.  However, the evidence suggested a much smaller increase/decrease of 13%/12%.  But falsity isn’t enough; there was no evidence that “misstating the extent to which food affects mean tizanidine plasma concentration was likely to influence consumers’ purchasing decisions.” Without materiality, summary judgment was appropriate.
Fourth, one promo piece claimed “Flexible Control in a Capsule,” images of the sun and moon, the words “day” and “night,” and information about “Important Pharmacokinetic Differences.” Apotex argued that this made a false claim that taking Zanaflex capsules with food reduces somnolence.  This was ambiguous at best: the brochure could be making a number of claims, such as that Zanaflex capsules relieve symptoms throughout the entire day, Zanaflex capsules release the drug in a controlled manner, or Zanaflex capsules allow for more effective treatment of spasticity over time.  And Apotex didn’t show misleadingness with extrinsic evidence.
Fifth, Acorda made statements about pharmacokinetic differences between Zanaflex capsules and tablets that differed from those on the FDA label, such as claiming unequivocally that effects and adverse events are related to plasma levels of tizanidine and calling the differences between capsules and tablets “important.”  But a claim isn’t literally false just because it exaggerates an FDA-approved statement.  There was no evidence allowing a reasonable juror to include that effects/adverse events weren’t related to plasma levels, that no important differences existed between the two forms, etc. Nor was there extrinsic evidence of consumer confusion.

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The nominative/descriptive line

Posted on October 30, 2014 by rtushnet

I love ads like this, which play with trademark meaning and non-trademark meaning: how should the law analyze them?

“Rekindle your love of beautiful books” ad for print books

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FTC challenges Gerber allergy-protection claims in court

Posted on October 30, 2014 by rtushnet

Read the FTC’s explanation.  The FDA approved an extremely limited claim about very sketchy scientific evidence, and Gerber converted that into “the first and only infant formula that meets the criteria for a FDA Qualified Health Claim,” with accompanying gold badge, while advertising that its formula could guard against children developing allergies.  That was probably a bad idea.

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Can’t replead TM as false advertising when functionality precludes TM

Posted on October 30, 2014 by rtushnet
Honeywell International Inc. v. ICM Controls Corp., 2014 WL 5438395, No. 11–569 (D. Minn. Oct. 24, 2014)
This litigation involves claims for patent infringement, copyright infringement, violations of the Lanham Act, and violations of the Uniform Deceptive Trade Practices Act based on ICM’s alleged copying of combustion control devices. A few months ago, the court kicked out Honeywell’s trade dress claim on functionality grounds and its false advertising claim based on ICM’s “Made in the USA” representations.  While at the time it questioned the validity of false advertising claims based on trade dress similarity, it now administered the coup de grace.
Honeywell maintained that it wasn’t just challenging ICM’s copying of trade dress, but also ICM’s promotion of its products as “the same as” Honeywell products.  ICM allegedly copied the appearance of Honeywell’s products “because that appearance gives contractors the impression that ICM’s products are ‘highly interchangeable’ with the range of Honeywell products they are intended to replace.”  However, ICM’s products were allegedly not the same and not always highly interchangeable with Honeywell products, making ICM’s marketing false or misleading.  Honeywell also argued that its history of making these products as “private label” products for third-party competitors contributed to the confusion.
The court was unconvinced.  Functionality protects competition and consumers.  The allegations didn’t show any false statement. Instead, ICM allegedly marketed products similar to Honeywell’s, which created a false impression of affiliation/sponsorship.  “But Honeywell International has no protectable interest in its claimed trade dress. Trade dress infringement does not arise out of ICM Controls’ products; the marketing of those same products does not constitute false advertising.”
Comment: I would state the doctrinal result as one that an implicit performance message, if any, conveyed by copying functional features must be allowed, even if that causes some confusion, to police the boundaries of trademark and patent law.  This is an unusual example of channeling from false advertising to trademark; more common is the other way around, where we usually require complaints about comparative advertising to be made under the head of false advertising with its stricter falsity, materiality, standing, and “advertising or promotion” requirements.
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Just in time for Halloween: this should make TM owners shiver

Posted on October 29, 2014 by rtushnet
The Ninth Circuit is not kidding about not presuming irreparable harm in trademark cases.
Titaness Light Shop, LLC v. Sunlight Supply, Inc., No. 13-16959 (9th Cir. Oct. 9, 2014)
Sunlight uses “Titan Controls” for devices that control indoor gardening equipment. Titaness Light Shop (TLS) began marketing indoor grow lighting systems under the mark “Titaness.”  The court of appeals reversed the district court’s grant of a preliminary injunction as an abuse of discretion, given that such an injunction is an extraordinary remedy that requires a clear showing of entitlement to such relief.
The problem was irreparable harm, as to which conclusory or speculative allegations are not enough.  Irreparable harm can include harm to reputation and goodwill, but evidence is required, not mere platitudes.  Here, Sunlight “Sunlight simply asserted to the district court that its goodwill and reputation would be irreparably harmed because TLS’s Titaness products were being sold by a website that supposedly catered to marijuana growers, while Sunlight had worked hard to ensure that its products were not marketed to marijuana growers.”  Yet Sunlight didn’t show actual or likely harm.  It didn’t show that its customers were aware of the relevant website; would associate products sold by the site with marijuana; or disliked marijuana enough to stop buying Sunlight products if they mistakenly perceived a link to marijuana.  Indeed, Sunlight was, at the time the appeal was argued, actually selling on that site as well.  

 Money quote: “The fact that Sunlight’s reputation might be harmed by the marketing of TLS’s products did not establish that irreparable harm to Sunlight’s reputation is likely.”

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Case against allegedly contaminated jerky treats proceeds

Posted on October 29, 2014 by rtushnet
In re Milo’s Dog Treats Consolidated Cases, 9 F.Supp.3d 523 (W.D. Pa. 2014)
The court adopted the magistrate judge’s recommendation to grant defendants’ motion to dismiss unjust enrichment claims, but to deny the motion as to the consumer protection and warranty claims in this dog jerky contamination case.
Plaintiff Funke sued on behalf of a class of purchasers of chicken and beef jerky dog treats from Milo’s Kitchen, owned by Del Monte.  She alleged that defendants misrepresented the quality of the treats, that they contained contaminants, and that after she fed the treats to her dog it became sick and ultimately had to be euthanized.  Among the allegedly false/misleading claims on the products’ packaging and associated websites: “100% Real—Wholesome and Delicious;” the ingredient list; “Milo’s Kitchen Home–Style Dog Treats are 100% real jerky, sausage slices, and meatballs;” each piece of Milo’s Kitchen Chicken Jerky “is made with whole fillets of 100% real jerky and the quality and care your dog deserves,” without any artificial chicken flavors or filler ingredients; and claims that their products comply with USDA, FDA and other food safety rules.
The FDA released numerous cautions to consumers about illness in dogs after consuming jerky treats made in China, as defendants’ were.  Defendants’ statements that neither the FDA nor the American Veterinarian Medical Association have been able to identify the cause of the illnesses or a connection between the illnesses and the jerky treats and that no contaminants have been found despite extensive testing were allegedly deceptive.  Funke further alleged that Milo’s safety process was deficient and that the FDA investigation failing to detect contaminants was fundamentally flawed.  Moreover, defendants allegedly failed to respond adequately once the contamination was found.
Funke brought the usual statutory California claims.  Defendants argued that the alleged misrepresentations were mere puffery.  Along with those listed above, plaintiff identified other alleged misrepresentations: that defendants started making Milo’s Kitchen dog treats because they believed dogs deserve treats made with the same quality of ingredients and care that their owners want in their food; the jerky treats are good for pets; and dogs deserve only the best with your food and deserve to enjoy snacks that not only look like jerky, sausage slices and meatballs, but actually are 100% real jerky, sausage slices and meatballs.
Other than the statements about defendants’ motivations for making the treats and the claim that they’re “good for pets,” each of these appeared verifiable and sufficiently specific to induce reliance. Moreover, even the statements that were puffery standing alone could contribute to the deceptive context of the packaging as a whole.
Funke also satisfied Rule 9(b) by alleging that defendants “engaged in a continuous course of conduct since 2007 (the when), whereby they have made misrepresentations on the jerky treat packaging and on their websites (the where), that their products are wholesome, safe, and that they otherwise have characteristics and qualities that they do not have which is likely to mislead the public (the what), and that these misrepresentations are false because many of the packages of jerky treats contain contaminants (the how).”  Funke also adequately alleged reliance.
Plaintiff Ruff’s claims fared similarly.  (Her dog also died.)  She challenged similar claims, including statements that the product is “100% REAL”; that it was made with “the quality and care your dog deserves”; and that the jerky treats are “wholesome natural treats.”  She also challenged Milo’s response to the FDA’s warnings as misleadingly downplaying the evidence and failing to warn consumers of the dangers.  She contended that neither she nor any reasonable person would have bought the jerky treats if they had known of the material risk of serious harm to their pets.  Along with the usual California claims, she alleged negligence and strict product liability.
The court found that Ruff adequately alleged a defect and proximate cause.  While an accident alone isn’t sufficient to prove a defect, defects can be alleged by circumstantial evidence such as that present here: Ruff bought a package of treats which she fed to her healthy dog; with no other material changes to its diet, it fell ill; it died from kidney failure within one week of consuming the treats; since Nov. 2011, the FDA has logged over 900 reports of illness and death from kidney failure in pets after consumption of jerky treats.
The court also found that Ruff could represent a nationwide class for her California UCL and CLRA claims, even though she wasn’t a California resident.  California law may be applied when the defendant is a California corporation, as here, and some or all of the alleged misconduct emanated from California, as alleged here, where Ruff pled that California was the headquarters for Del Monte’s US marketing and that the California location provides all customer support and makes all corporate decisions regarding marketing.  She could also bring a North Carolina UDTPA claim, because she lived there.
Ruff’s Magnuson-Moss Warranty Act claims for breach of the implied warranty of merchantability survived even though there was no privity.  The rule requiring privity has an exception for “foodstuffs,” and there was no reason to limit that exception to human food.

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Whole Foods’ not wholly natural foods are ok

Posted on October 27, 2014 by rtushnet
Gedalia v. Whole Foods Market Services, Inc., 2014 WL 5315030,  No. 4:13–CV–3517 (S.D. Tex. Sept. 30, 2014)
Gedalia sued on behalf of a putative class of people who bought Whole Foods’s private-label 365 Organic and 365 Everyday Value products allegedly falsely labelled as being organic, natural, and/or GMO-free.  Plaintiffs brought claims under various state consumer protection laws as well as common-law theories.  The claims encompassed hundreds of different products; the court expressed doubt about plaintiffs’ standing to represent consumers of products they didn’t purchase, but didn’t resolve the issue because it ruled on lack of plausible reliance. Likewise, the court was skeptical that plaintiffs could bring claims based on online and in-store representations not present on the actual packages, because they didn’t allege they saw those representations.
The court did reject preemption arguments; the Organic Foods Production Act (OFPA) does not clearly indicate a purpose to occupy the field, nor did it conflict with relevant California law.  Nor were “natural” claims impliedly preempted by the FDCA/NLEA.  Reliance on the primary jurisdiction doctrine “would likely be unfruitful due to the agency’s long-standing reluctance to officially define the term ‘natural.’”
The sticking point was a misrepresentation that would be likely to deceive a reasonable consumer.  This is usually a fact question unsuited for a motion to dismiss, unless “the advertisement itself made it impossible for the plaintiff to prove that a reasonable consumer was likely to be deceived.”  Other cases have noted that there’s not much reason to think that consumers know or understand federal definitions of things like “organic” or “synthetic.”  Williams v. Gerber, 552 F.3d 935 (9th Cir. 2008), held that consumers aren’t required to read the ingredient label to correct misleading impressions from the front of a package. In particular, a claim to be made with fruit and “other all natural ingredients” could reasonably be interpreted to mean “all the ingredients in the product were natural.”  Subsequently, courts have generally held that the definition of “natural” is a question of fact, to be determined based on “contextualized evidence regarding consumer perceptions.”  However, courts have also required pleadings to specify which ingredients are unnatural.  And some healthy-sounding terms have been held to be puffery.
Here, the allegations were that 365 Brands deceptively include (1) non-organic ingredients in organic products, (2) GMOs and (3) Unacceptable Ingredients. Plaintiffs submitted hundreds of product label images, but none of the labels said “100% organic,” though they did have USDA and third-party certification seals. Plaintiffs alleged that the products include “synthetic ingredients that are not permitted in organic foods” and that “have not been approved to be used in any food at all, much less in organic food.”  But they didn’t allege that the certifications were invalid or that the labels violated USDA regulations.  OFPA allows non-organic ingredients in “organic” food, depending on the label.  There was no reason to believe that “the reasonable consumer would assume 365 Brands organic products are any more organic than what organic certifying agencies require.”
GMOs: many of the labels stated that “365 Everyday Value products are formulated to avoid genetically engineered ingredients.” However, lab test results showed 365 Everyday Value Corn Flakes contained 57% GMO corn.  The Whole Foods website directed consumers to buy 365 Everyday Value products if they wanted to avoid GMOs and stated that “[a]ll ingredients derived from plants are sourced to avoid GMOs, and hundreds of those products are verified by the Non-GMO Project.”  However, another page on the website distinguished “enrolled” and “verified” non-GMO products. “While the website is not a model of clarity, the lab results and other evidence do not show 365 products were not ‘sourced to avoid’ GMOs, nor that verified non-GMO products contained GMOs.”  None of the labels and literature stated that 365 Brands products were “GMO free.”  (Really?  Because that seems pretty misleading to me; the implicit message is clearly that there aren’t GMOs, even if it’s carefully worded to avoid making that explicit claim.)
As for Unacceptable Ingredients, that came from a list on the Whole Foods website. That list started with a bold disclaimer that Whole Foods reserved the right to change the list at any time, and appeared to be written for producers hoping to sell their products to Whole Foods.  Plaintiffs alleged that they bought products containing Unacceptable Ingredients, including “irradiated foods” (cholecalciferol, ergocalciferol), “nitrates” (thiamine mononitrate), “artificial colors,” and “artificial flavors.” Whole Foods disputed the definition of “irradiated foods,” arguing that it targeted “the use of ionizing radiation in meat, produce, seafood and freestanding spice products, not obscure nutrient, vitamin, and mineral ingredients.”
Also, plaintiffs argued that all food coloring was “artificial,” even those made of “natural” ingredients, according to the FDA definition of “color additive.” They alleged that these ingredients didn’t meet the reasonable consumer’s understanding of the term “natural,” which “comports with federal law and Whole Foods’ proffered definition.” Whole Foods elsewhere defined natural foods as “foods that are minimally processed, largely or completely free of artificial ingredients, preservatives and other non-naturally occurring chemicals and as near to their whole, natural state as possible.” The USDA allowed “natural” on meat and poultry labels, as long as the products didn’t contain “any artificial flavor or flavoring, coloring ingredient, or chemical preservative, or any other artificial or synthetic ingredient” and provided that “the product and its ingredients are not more than minimally processed.”  Elsewhere, regulations define synthetic as “[a] substance that is formulated or manufactured by a chemical process or by a process that chemically changes a substance extracted from naturally occurring plant, animal, or mineral sources.”  While the FDA has no official “natural” definition, as a matter of policy it treats the term “as meaning that nothing artificial or synthetic (including all color additives regardless of source) has been included in, or has been added to, a food that would not normally be expected to be in the food.”
Because the FDA definition incorporated normal consumer expectations, it didn’t help with the reasonable consumer standard. The Whole Foods definition circularly defined “natural” as “not artificial” and “as near to [a] natural state as possible.” The USDA definition was more stringent, but was limited to meat and poultry.  Still, Whole Foods didn’t offer an alternative definition that might include all the allegedly “artificial” ingredients plaintiffs challenged. Instead, it argued that the proffered interpretation was “based on arcane and technical regulatory definitions, not what a reasonable consumer would consider the terms to mean.”  While whether reasonable consumers would consider an ingredient “natural” is a fact question, plaintiffs weren’t challenging the label “all natural” but were alleging misrepresentations based on the Unacceptable Ingredient list, from a page that plaintiffs didn’t show reasonable consumers would visit or rely on.
Plaintiffs also relied on images of advertising and signage that state, e.g., “Nothing artificial … ever, ever, ever.”  But none of the labels referred to the Unacceptable Ingredient list.  The court couldn’t find references to “natural” or “artificial” ingredients on the submitted labels, though it was possible that they existed but weren’t legible on the submitted images. “Based on the images submitted, a reasonable consumer would not consider such drawings to be more than decorative graphics and would not rely on them in purchasing the products.”  Plaintiffs argued that Whole Foods’ broad representations on its signs etc. belied the “dizzying array of ingredients” listed on its products. “But that is the purpose of requiring ingredient lists on every product label.” 
Plaintiffs’ argument reduced to the idea that, “since Whole Foods has developed a successful brand as a provider of natural foods, it should be obligated to guarantee every molecule in every product it sells under its in-house brand is natural,” and likewise with “organic,” in spite of OFPA’s tiered labeling regime.  Although the court commented that there’s an argument that organic labeling is inherently misleading, plaintiffs didn’t show how Whole Foods’ use of the term was any different from that of other organic producers, and the same was true of “natural.”
“Natural” cases allowing claims to proceed required “contextualized evidence regarding consumer perceptions,” but the claims here were far too broad.  “The only common representation on the actual labels of 365 Products is a logo stating ‘365 EVERYDAY VALUE.’” This didn’t plausibly suggest natural ingredients, but rather suggests that the products were less than premium quality.

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