RAW power: over dissent, 9th Circuit orders trial on infringement, cancellation of TM applications

Posted on April 5, 2024 by rtushnet

BBK Tobacco &
Foods LLP v. Central Coast Agriculture, Inc., — F.4th —-, 2024 WL 1356981, Nos.
22-16190, 22-16281 (9th Cir. Apr. 1, 2023)

Over a dissent, the
panel reverses the grant of summary judgment on noninfringement, reasoning that
the overlap in the use of the (descriptive) word RAW between the parties’ somewhat
related products was enough to avoid summary judgment—which should rarely be
granted in trademark cases (ugh), despite major visual differences and the lack of actual confusion evidence
and low confusion rates shown by the parties’ surveys.

plaintiff’s RAW

defendant’s Raw Garden

Also over a dissent,
the panel finds that a court can order trademark applications
cancelled, not just registrations. (The panel did affirm the refusal to cancel defendant’s
registrations on grounds of unlawful use, since they weren’t for unlawful
items.)

BBK sells smoking-related products with RAW branding; CCA
allegedly infringed by selling cannabis
products with the mark “Raw Garden.” BBK sought to cancel several of CCA’s
trademark applications for lack of bona fide intent to use the mark in
commerce. “We hold that, under 15 U.S.C. § 1119, when an action involves a
claim of infringement on a registered trademark, a district court also has
jurisdiction to consider challenges to the trademark applications of a party to
the action. We also hold that lack of bona fide intent to use a mark in
commerce is a valid basis to challenge a trademark application.”

The dissent
disagreed, given that the statutory language is:

In any action involving a registered mark the court may determine the
right to registration, order the cancelation of registrations, in whole or in
part, restore canceled registrations, and otherwise rectify the register with
respect to the registrations of any party to the action.

But, the majority
reasoned, the Lanham Act refers to an “[a]pplication for use of trademark” as a
“request [for] registration of [a] trademark on the principal register.” “A
challenge to an application thus necessarily affects the applicant’s right to a
registration…. Indeed, some of the dissent’s own examples use the term ‘right
to registration’ when adjudicating an opposition to an application.” Adjudicating
applications in a single action was good for speed and efficiency.

The dissent would
have allowed the PTO’s iterative registration process to go forward. The
dissent would have interpreted “right to registration” in the relevant
provision to mean “the court’s authority to adjudicate the ownership, scope,
priority, and use of trademarks, which may entitle a party to registration of
the mark.” That is, courts could determine who has rights to a trademark, but
that’s not the same thing as cancelling pending trademark applications, as the
use of “otherwise” in the final phrase of § 1119 indicates. “Of course, the
right to registration may affect the applications’ adjudication. But that
doesn’t alter Congress’s choice to leave decisions over trademark applications
to the PTO.” Noscitur a sociis also supported excluding the authority to cancel
trademark applications from § 1119. “Given the neighboring terms, we should
likewise read ‘right to registration’ as only a power over completed
registrations.” (The section title—“Power of court over registration”—also suggested
that federal courts lack jurisdiction to cancel pending trademark applications.
“Though a statutory title may never ‘limit the plain meaning of the text,’ a
title may sometimes be a helpful interpretative tool.”)

from Blogger http://tushnet.blogspot.com/2024/04/raw-power-over-dissent-9th-circuit.html

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Dueling surveys don’t defeat class certification in supplement suit

Posted on April 5, 2024 by rtushnet

Corbett v.
PharmaCare U.S., Inc., 2024 WL 1356220, No. 21cv137-JES (AHG) (S.D. Cal. Mar.
29, 2024)

The court partially
grants class certification and rejects motions to exclude experts. Plaintiffs
allege consumer protection and breach of warranty claims based on PharmaCare’s
Sambucol product, a dietary supplement that is advertised to “support immunity”
and contain a proprietary extract of black elderberry. Sambucol comes in
various forms, including syrup, tablets, capsules, and gummies. The challenged
labels include some combination of the following statements: “Supports
Immunity”; “Scientifically Tested” (xkcd is,
as always, excellent on this); “Supports the immune
system”; “Virologist Developed”; “provides strong immune system support to help
you and your family stay healthy throughout the year. … conveniently arms you
with some of the best protection nature has to offer”; “only Sambucol® can
guarantee consistent, immune supporting properties in every serving”; “Developed
by a world renowned virologist, Sambucol®’s unique manufacturing process
preserves and maximizes the naturally occurring health benefits of the Black
Elderberry”; “used in published scientific studies. No other elderberry brand
can make the same claim”; “Developed by a world renowned virologist, Sambucol®
has been trusted by millions worldwide. Sambucol can be taken every day for
continuous immune support.”

Plaintiffs had two
theories: first, the products contain a new unreported dietary ingredient and
therefore, were illegal to sell as dietary supplements. Second, the products
were labeled and marketed in a way that claims that they mitigate or prevent
disease.

The court allowed
the parties’ experts and their dueling consumer perception surveys, plaintiffs’
materiality survey, and dueling conjoint analysis/damages opinions.

One of the
plaintiffs was a fine representative; he testified that he wouldn’t have bought
the products if he’d known of the illegality, which didn’t make him atypical.
The other testified that he only bought products that didn’t make the alleged
misrepresentations at the core of the disease claim, so wasn’t a typical
representative for the disease claims. On the other hand, it didn’t matter that
he didn’t recall seeing the “dietary supplement” label because the crux of the
argument was that plaintiffs wouldn’t have bought the products if they’d known
they were illegal, which didn’t depend on reading the phrase “dietary
supplement.”

Because of state-law
differences, a nationwide class couldn’t be certified, but a California one
could be. The court declined to find the drug theory preempted at this time,
noting that California’s Sherman Law adopts the FDCA’s provisions; this isn’t
obviously an attempt to directly enforce the FDCA.

Predominance for the
drug claims was satisfied based on the theory that an illegal unapproved
ingredient would render the products illegal for sale, and that a jury could
find that illegality would be material to a reasonable consumer. “Plaintiffs’
unfair or deceptive business practice NDI claim may rest upon a theory that
even putting the products for sale on the marketplace is an implicit
representation that they are being legally sold and comply with the FDA.”
Further, this finding could be supported at the certification stage “based on
evidence such as the perception of the named representatives and does not
require survey evidence.”

Predominance for the
disease claims: PharmaCare argued that the labels varied between products, and
while the majority of packaging contains the statements “support immunity” and
“scientifically tested” on the front of the package, the statement “virologist
developed” varies in its location, including on other sides of the package and
in varying font sizes. Courts don’t require uniformity, only “sufficiently
similar representations.” The question was whether differences were “materially
different.”

There was no dispute
that the phrases “scientifically tested” and “supports immunity” appeared on
the front of the packaging of all products and in largely the same format and
prominence. As for “virologist developed,” it appeared variously on the back,
side, and top panels, which the court didn’t find materially different from one
another (as front placement might have been).  The text also differed, in that mostly
“virologist developed” appeared as part of a bulleted list, but for several of
the products, it appeared in a paragraph on the package. Still, the text wasn’t in a smaller or
finer print; “this difference in how this one phrase appears on packaging is
not ‘materially’ different to preclude class certification, particularly in
light of the other statements that do appear consistently amongst all the
packaging for the products.”

variants of “virologist developed”

PharmaCare argued
that disclaimers on the packaging precluded a disease claim: “[t]his product is
not intended to diagnose, treat, cure or prevent any disease” on the back or
the side, but not on the front. Whether disclaimers avoid deception is
typically a question of fact.

Plaintiffs’ consumer
perception survey showed people products with and without the challenged
representations, modified to be “brand neutral”—that is, removing mentions of
Pharmacare and Sambucol, botanical imagery, and modified the background color
so that participants could not use that to determine the brand.

The results showed
that test group respondents shown the challenged representations were 2.2 times
more likely to perceive the surveyed health benefits (51.9% versus 24.2%, or 27.7%
net deception).  Defendants’ expert
criticized the survey universe as overbroad—nearly half hadn’t purchased any of
the products at issue in the past. He also argued that the survey didn’t test
the theory of liability, and that the survey should have tested individual
representations individually; used open-ended rather than closed-ended
questions; and used actual packaging instead of modified packaging.

Defendants’ expert’s
survey used respondents that shopped at supermarkets and drugstores who’d made
a recent purchase in the product category of nutritional supplements/vitamins.

After being shown one
of defendants’ products, respondents were asked open-ended questions, including
1) “please list all the reasons that you would or would not purchase this
product;” and 2) “if you were to purchase [the product], would you have any
expectations about specific benefits it would provide” and if answered yes,
asked to explain their beliefs. Respondents were also asked a close-ended
question on how likely it was that the product would deliver these specific
benefits, being able to choose between “very likely,” “somewhat likely,”
“neither likely nor unlikely,” “somewhat unlikely,” “very unlikely,” and “don’t
know/no opinion.”

Then respondents
were shown actual labels and asked to select any of 24 options of statements on
the packaging that appealed to them, which included the challenged representations.
If they did, they got a follow-up: 

In this survey, only
39.8% of respondents identified health-related reasons for why they would purchase
the product, and only 21.2% identified immunity support. Only 71.2% of
respondents answered that they would expect the product to provide benefits; 49.2%
reported some health-related benefit, with 33.9% identifying immune
support/boost immune system. Id. Dr. Keegan’s survey further tested attributes
that consumers found appealing, including the following:

Further questions found that consumers varied in their certainty:

Defendants’ surveyor
concluded that consumers provide a wide range of reasons for purchasing the
products, without a unified or predominant reason driving their decision, that
they had wide expectations of the benefits the product would provide, that
there was wide variation in what consumers found appealing based on the
statements on the packaging, and that consumers did not uniformly understand
the statements to mean what plaintiffs assert they mean.

Plaintiffs’ expert
had his own criticisms, mostly about use of open-ended questions for most of
the survey, and a close-ended question with a ton of options. He contended that
using such questions in a self-administered online survey tends to
underestimate phenomena, and that survey experts believe that close-ended
questions are “more appropriate for scientifically rigorous, quantitative
survey research.” In his view, the survey encouraged respondents to answer “I
don’t know” to his open ended questions, while providing 24 options for the
close-ended question encouraged “under selection” of options.

Moreover, to plaintiffs’
expert, the responses actually supported the claim: “5 of the 7 most
“appealing” claims were related to the Plaintiffs’ challenged claims: ‘Supports
your immune system’ (62.7 % of respondents); ‘Supports immunity’ (59.0%);
‘Strong immune system support to help you and your family stay healthy
throughout the year’ (48.9%); ‘Immune supporting properties’ (48.9%); and
‘Scientifically tested’ (41.0%).”

The dispute didn’t
defeat predominance, because it could be resolved classwide.

So too with the
dispute over plaintiffs’ materiality survey (and defendants’ expert’s modified
version thereof). The materiality survey was a referendum: it tested consumers’
preference for buying the products with or without the challenged representations.
Consumers were 11 times more likely to choose the product with the
representations (8.1% versus 91.9%).

Defendants’ expert argued that this was
dumb, because the format drew attention to the only difference between the
products, and the product packaging in the control left open space that, in the
real world, would be filled with other product benefit claims. He conducted a survey
showing only Sambucol with the claims to one group and Sambucol without to the
other, and found “no statistically significant difference between respondents’
likelihood of purchasing products with and without the Considered
Representations.” 

Again, this “amounts to a disagreement on survey methodology,
rather than suggestions that a survey could not be designed to test materiality
in the first place.”

Damages: Plaintiffs
first argued that a full refund model could be used to measure damages where a
plaintiff’s theory of liability is that the product is valueless (which an
illegal or useless product would be). The court disagreed on uselessness,
because plaintiffs didn’t show that the products had no other benefits at all. Plaintiffs
also argued that a product might actually be worthless if it was illegal to be
sold as it was, but the cited cases involved a greater degree of illegality (illegal
nicotine sales to youth, or poison sold as food, or a Schedule III controlled
substance).

But a price premium
model could work, and it was enough at this stage to propose, in detail, how
that would be done.

from Blogger http://tushnet.blogspot.com/2024/04/dueling-surveys-dont-defeat-class.html

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My latest acquisition

Posted on April 4, 2024 by rtushnet

A small "Diet Brick" soda machine made out of Legos

 My son informs me that this is an “illegal build” but I like it anyway.

from Blogger http://tushnet.blogspot.com/2024/04/my-latest-acquisition.html

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failure to properly allege falsity dooms FedEx at 6th Circuit

Posted on April 3, 2024 by rtushnet

Fedex Ground Package
System, Inc. v. Route Consultant, Inc., No. 23-5456, — F.4th —-, 2024 WL
1364707 (6th Cir. 2024)

The court of appeals
affirmed the dismissal
of FedEx’s false advertising claims (under the Lanham Act and Tennessee
Consumer Protection Act), albeit on somewhat different grounds. The district court had focused on FedEx’s harm story; the court of appeals turns on falsity.

FedEx (here called
FXG) alleged that Route Consultant made disparaging statements to foster
discontent between FXG and its contractors, which would damage FXG and benefit
Route Consultant.

FXG doesn’t deliver
packages directly; it has a network of independent service providers
(confusingly for me, ISPs) that provide pickup and delivery within neighborhoods,
and transportation service providers (TSPs). Collectively they’re called
“contracted service providers” (CSPs).

Spencer Patton owns
several ISPs that work with FXG and also owns Route Consultant, a consultancy
business for current CSPs and those that are looking to get into the business.
Route Consultant advises CSPs on “buying and selling FXG routes, ISP and TSP
ownership and operations, and fleet strategy.” It also provides brokerage
services for CSPs interested in selling their business or otherwise assigning
their CSP contracts, and it provides instructional courses and programs for
CSPs.

FXG asserts that
Route Consultant launched a promotional campaign premised on a “fictionalized
crisis” between FXG and its CSP network, claiming that the CSPs were
“financially collapsing under the weight of … dramatic cost changes”
resulting from global economic trends, and that these changes had “gone
unaddressed by FXG in 2022.”. The alleged aim was to motivate CSPs to
renegotiate their contracts with FXG, which would in turn allow Route
Consultant to position itself as the intermediary for the renegotiations.

FXG identified nine
specific claims relating to FXG’s alleged failure to make financial adjustments,
including that the “average FXG business run by a CSP currently operates on
profit margins below 0%”; “the current CSP financial model is collapsing due to
substantial increases in the cost of fuel, labor, and vehicles over the past 12
months”; pointing to “soaring levels of CSP default rates as evidence of the
current financial stress within the network”; and “Almost all of the other
contractors that had renegotiation requests were also denied.”

For purposes of a
motion to dismiss, “a complaint may not baldly assert that a challenged
statement is false or misleading. It must explain why and how it is so.”

Statements that FXG
had made “no financial adjustments” for CSPs: These were factual claims, but not
plausibly alleged to be literally false. The complaint alleged literal falsity
because “ISPs [ ] requested mid-contract renegotiations for only about 10% of
their agreements in 2022; FXG has consented to approximately 40% of
renegotiation requests since July 1, 2022; and over 90% of those renegotiations
led to agreement on new terms that resulted in higher contractual payments to
the ISPs.” But, in the context in which they were made, Route Consultant was
not describing a failure to make financial adjustments on an individualized
basis, but contrasting the “flat, across-the-board” CSP pay increases that FXG
made in 2020 “in order to overcome the extraordinary conditions of” the
COVID-19 pandemic and also asserting that FXG refused to properly address the
issues raised by a “group of FedEx contractors” who wrote letters of concern. “The
surrounding context of the statements makes no mention of individual
renegotiation requests being denied.”

On a motion to
dismiss, only “reasonable inferences” are drawn in the plaintiff’s favor. “And
under the circumstances present here, it would be unreasonable to divorce [the
statements] from their context.” Without literal falsity, the complaint didn’t
allege misleadingness.

Statements that the
“average FXG business run by a CSP currently operates on profit margins below 0%”
and that “since [ ] Q4 of 2020, the industry has seen ‘a 15% pullback on the
value of routes ….’” These were also statements of fact, but the complaint didn’t
actually plead that they were false or misleading. Alleging that these
businesses generated an operating margin of 16%, based on FXG’s calculations
from Route Consultant’s appendix, didn’t go to profit margin. Likewise,
alleging that an “industry analyst …
noted that ‘these ISP businesses are being sold for an average multiple of 0.8x
Sales and over 2x their fleet value’ ” does not “explain how the sales value of
an ISP at one point in time demonstrates whether there has been a ‘pullback’ in
a route’s value over a period of time.”

Financial model
collapsing/soaring levels of CSP default rates: These were not statements of
fact but loose, hyperbolic terms. Even if “soaring” just meant rising, FXG didn’t
plead falsity, “because its complaint refers only to the financial health of
ISPs, not CSPs, and says nothing about defaults at all.” Anyway, collapsing/soaring
couldn’t be measured to be falsified.

“Almost all of the
other contractors that had renegotiation requests were also denied.” This was a
statement posted in August 2022; the allegation that “FXG has consented to
approximately 40% of renegotiation requests since July 1, 2022; and over 90% of
those renegotiations led to an agreement on new terms that resulted in higher
contractual payments” did not make this statement literally false, because it
wasn’t limited to the period starting in July 2022; in context, it referred to
requests over the past year and was not “unambiguously deceptive.”

from Blogger http://tushnet.blogspot.com/2024/04/failure-to-properly-allege-falsity.html

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The People’s Joker

Posted on April 1, 2024 by rtushnet

 Interesting NYT story, in which I am quoted.

from Blogger http://tushnet.blogspot.com/2024/04/the-peoples-joker.html

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Podcast on Bass Notes and Base Rates

Posted on April 1, 2024 by rtushnet

 I’m on Excited Utterance with Ed Cheng discussing my article with Chris Buccafusco.

from Blogger http://tushnet.blogspot.com/2024/04/podcast-on-bass-notes-and-base-rates.html

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Gerber’s Good Start troubles continue

Posted on March 29, 2024 by rtushnet

Hasemann v. Gerber
Prods. Co., 2024 WL 1282368, No. 15-CV-2995(EK)(JAM), 16-CV-1153(EK)(JAM),
17-CV-0093(EK)(JAM) (E.D.N.Y. Mar. 25, 2024)

Gerber Good Start
Gentle formula isn’t like most other infant formulas, which are made with
“intact” cow’s milk protein. GSG uses cow’s milk protein that has been
partially broken down (“100% Whey-Protein Partially Hydrolyzed”). The FDA
allowed GSG to make “certain specified, modest claims” related to atopic
dermatitis, aka eczema, which is the most common allergic disease in infants.

But the FDA was very
limited in what it allowed: It would not object if Gerber claimed that “little
scientific evidence suggests” that feeding certain infants a “100% Whey Protein
Partially Hydrolyzed infant formula” for the first four months of life “may
reduce the risk of developing atopic dermatitis throughout the 1st year of
life.” The FDA also agreed not to challenge the assertion that “very little
scientific evidence suggests” that the benefits may persist “up to 3 years of
age.”

Gerber then revised GSG’s
packaging to say, among other things, that GSG was the first and “only” formula
“to reduce” an infant’s “risk of developing allergies.”

Previously, NY
and Florida classes were certified, and there are also individual claims
under New York, Florida, North Carolina, and Wisconsin law.

Here, the court
denied Gerber’s motion for near-complete summary judgment (except Wisconsin
individual claims) and denied plaintiffs’ motion for partial summary judgment, and
also cabined the scope of Gerber’s expert’s testimony.

Plaintiffs alleged
two misrepresentations (1) GSG “reduces the risk of infants developing
allergies.” (2) Implied FDA endorsement, which allegedly occurred when Gerber
“deemphasized” the qualified health claim’s “underwhelming specifics” in its
ads.

First, a safety-seal
sticker on certain GSG canisters stated: “1st & ONLY Routine Formula // TO
REDUCE RISK OF DEVELOPING ALLERGIES // See label inside.” That label, which
could be peeled back before purchase (if you would actually do that in a store)
stated, in part:

Good to know. Our Comfort Proteins® Advantage … If you choose to
introduce formula and have a family history of allergy, feeding a formula
exclusively made with 100% whey partially hydrolyzed, like GOOD START Gentle
formula, during the first four months of life may reduce the risk of atopic
dermatitis* throughout the 1st year, compared to formulas made with intact
cow’s milk protein. The scientific evidence for this is limited and not all
babies will benefit.

The asterisk
following “dermatitis” referred to this statement: “*the most common allergy in
infancy. GOOD START Gentle formula should not be fed to infants who are
allergic to milk or infants with existing milk allergy symptoms. Not for
allergy treatment.”

Magazine ad showing "mommy's eyes, not her allergies" claim

Second, a full-page
print magazine ad that featured an image of a baby’s face with the sentence:
“The Gerber Generation says ‘I love Mommy’s eyes, not her allergies.’ ” Smaller
text below this line, next to an image of a GSG canister, stated:

If you have allergies in your family, breastfeeding your baby can help
reduce their risk. And, if you decide to introduce formula, research shows the
formula you first provide your baby may make a difference. In the case of
Gerber Good Start Gentle Formula, it’s the Comfort Proteins Advantage that is
easy to digest and may also deliver protective benefits. That’s why Gerber Good
Start Gentle Formula is nutrition inspired by breastmilk.

Third, there was a
similar TV ad with “may also” language. (The
FTC did not like these ads either.)

Plaintiffs alleged
that these ads were false and misleading because there was no scientific evidence
supporting the claim that GSG reduced the risk of developing certain allergies
or atopic dermatitis.

As for the implied
FDA endorsement: (1) A coupon affixed to certain GSG containers described it as
“the first and only formula brand made from 100% whey protein partially
hydrolyzed, and that meets the criteria for a FDA Qualified Health Claim for
atopic dermatitis.” It also bore a gold roundel, featuring the phrase “1st AND
ONLY” surrounded by the phrase “MEETS FDA QUALIFIED HEALTH CLAIM.” (2) A print
magazine advertisement described GSG as the “1st Formula with FDA qualified
health claim.” (3) Another print ad said GSG was “the first and only infant
formula that meets the criteria for a FDA Qualified Health Claim.”

First and only banner ad claim

In fact, the FDA authorizes
health claims only when there is “significant scientific agreement.” It allows
qualified health claims when they are “supported by some scientific evidence” and
accompanied by a disclaimer; the FDA doesn’t approve these claims, but instead
exercises enforcement discretion not to go after them. Crucially, “[t]he
qualified health claim about GSG that the FDA ultimately permitted is not the
claim Gerber originally sought permission to make.” Although Gerber referred to
the qualified health claim determination in its ads, it didn’t use any of the approved
versions.

Gerber’s proposed expert
witness, a pediatric gastroenterologist who worked at Gerber for nearly two
decades, first as the Medical and Scientific Director, then as the Global Chief
Medical Officer, would opine that “Gerber had, and has, a scientifically sound
basis” to represent that “feeding [GSG] instead of intact cow milk protein
formula (CMF) to infants with a family history of allergy in the first month of
life can reduce the risk that said infants will develop allergies, particularly
and specifically atopic dermatitis.” He would further opine that “there is a
significant and substantial body of scientific evidence to support the
representations in the Challenged Advertisements.” “These opinions are, of
course, more forceful than the claims the FDA permitted Gerber to make on the
same subject.”

Plaintiffs’
arguments about bias, lack of data, and prejudice/confusing the jury did not
justify his exclusion, but did justify limiting his testimony. He could be
impeached with his relationship with Gerber. As for inadequate data, his report
was “at base a literature review” considering 20 peer-reviewed publications of infant
trials; he identified four studies as high quality. Three of those reported
that the subjects receiving GSG or its equivalent saw statistically significant
reductions in atopic dermatitis or other allergic diseases for at least a short
time. Other studies showed no reduction compared to ordinary cow’s milk formula,
or at least no statistically significant reduction. A review of medical literature
is generally reliable methodology.

However, it could
not appropriately include “findings that had not been published before Gerber
disseminated the challenged advertisements. … Here, the operative question is
whether Gerber’s challenged ads were misleading when made, not whether they
would be misleading if made today.” Thus, the expert would be limited, when
opining on the science underlying claims in a given ad, “to the body of
research that existed when that advertisement debuted.” But most of the “high
quality” studies would qualify under that restriction. Plaintiffs disagreed
that the studies were “high quality,” but that was an issue for the factfinder.

As to summary
judgment: there was a genuine issue of material fact about whether reasonable
consumers would perceive the ads to claim that GSG could reduce allergy risk.
(Is that not obviously what the ads say, especially the sticker touting: “1st
& ONLY Routine Formula // TO REDUCE RISK OF DEVELOPING ALLERGIES // See
label inside.”?) “Even accepting, arguendo, that the more cabined language on
the ‘label inside’ clarified that GSG does not reduce the risk of developing
allergies, a jury could still find that a reasonable consumer would be left
with that impression.” As to the other ads, the implication was obvious, and a
jury could find it so. (I’m not clear how a reasonable jury could find
otherwise.)

Further, internal
communications showed that Gerber actively endeavored to make an allergy claim
with these ads: Gerber asked its advertisers in a “communications brief” to
“[c]reate a strong link between GSG … [and] an allergy risk reduction
benefit.” Gerber’s marketing team described “being challenged to find ways to
push the envelope with bringing the allergy message forward.” Gerber told its
ad firm that it “would now like to pursue” an ad “that actually uses the word
‘allergy’ in the headline (where previously we were not able to).”

There was also a genuine
dispute of material fact as to whether the “first and only” group of challenged
ads claimed FDA endorsement of GSG. “[A]dvertisements that reframe critiques of
a product as praise can constitute false advertising.”

Gerber argued that
none of the ads explicitly claimed to reduce allergies (uhhh… I do not think
that word means what you think it means) or made FDA-endorsement claims, and
there was no extrinsic evidence about what claims consumers would take away.

But “the requirement
of extrinsic evidence to prove that implied assertions in ads are false is
chiefly a requirement of Lanham Act false advertising claims — claims not
present here.” (And by the way, it has no foundation in the Lanham Act, either.
Courts just made it up as a case-management tool, while imposing a different
rule in TM cases.) “GBL and FDUTPA claims challenging deceptive advertisements
have no extrinsic evidence requirement. Those statutes ‘are not mere Lanham Act
analogues.’”

“The plaintiffs need
not adduce extrinsic evidence of consumer perception to create a jury question
on the deceptiveness element.” (Side note: the individual plaintiffs’ own
testimony should be “extrinsic evidence,” too.) (Extra side note: I know we’re
all textualists now, but maybe this debate would be aided by talking about why
requiring extrinsic evidence, or survey/consumer perception evidence
testimony in particular, would be important.)

However, the
plaintiffs didn’t show as a matter of law that GSG couldn’t
reduce allergy risk. Likewise, whether the FDA statements were false was a triable
issue, though it was a close call: “Gerber
has adduced little evidence to rebut the plain implications of its advertising,
when compared to the qualified health claims that the FDA actually authorized. …
Here, though there is no genuine dispute about whether the FDA ‘endorsed’ GSG,
there is … a lingering dispute about whether Gerber implied such an
endorsement.”

Nor was summary
judgment appropriate for either side on a price premium theory. Plaintiffs’
experts, who used conjoint analysis and similar standard techniques, were not
unquestioned. Under the relevant state laws, “damages need not be calculated by
mathematical precision” but “may include estimates based on assumptions, so
long as the assumptions rest on adequate data.” One of the experts calculated price
premiums in ways that didn’t rely on conjoint analysis, but used internal
Gerber metrics, including its own estimate of the price elasticity of demand, for
the value Gerber would realize from promoting the qualified health claim,
including its projection of 6-10% growth in the United States for the first six
months after introduction of an “allergy claim” to the U.S. market;  Gerber sales forecasts that quantified various
factors, including the “allergy claim,” as “impactors” on future sales; and the
price increases for GSG that Gerber implemented from 2011 to 2014, spanning the
period of these claims.

Gerber’s core
argument was that GSG was priced equal to or below other formulas in the Gerber
Good Start line during the class period, even though these other formulas
undisputedly did not make the challenged claims. But there was also evidence
that Gerber expected to be able to raise prices across “the entire Good Start
portfolio” thanks to the challenged advertising. This was a jury question.

from Blogger http://tushnet.blogspot.com/2024/03/gerbers-good-start-troubles-continue.html

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conjoint analysis has to isolate challenged representations

Posted on March 29, 2024 by rtushnet

Moore v.
GlaxoSmithKline Consumer Healthcare Holdings (US) LLC, — F.Supp.3d —-, 2024 WL 348821, No:
4:20-cv-09077-JSW (N.D. Cal. Jan. 30, 2024)

The court grants partial
class certification and allows/excludes some expert testimony in this case
alleging that ChapStick products were misleadingly labeled “100% Natural,”
“Natural,” “Naturally Sourced Ingredients,” and “100% Naturally Sourced
Ingredients” when they actually contain non-natural, synthetic, artificial,
and/or highly processed ingredients.

The court allowed the
expert testimony of a survey researcher for a proposed consumer perception
survey and proposed conjoint analysis. Objections to the proposed survey went
to weight, rather than admissibility. Likewise, testimony from an economic
consultant was admissible because it provided additional information about
conjoint analysis, including how it would adequately account for supply-side
factors from an economics standpoint.

However, testimony
of chemists about their view of what constituted an “artificial” ingredient
wasn’t relevant: “Here, the only relevant understanding of the Challenged
Statements is that of the reasonable consumer.” Both parties’ chemists were
excluded.

Skipping over a lot,
could materiality be proved on a classwide basis? As previous cases indicate, “[m]ateriality
can be shown by a third party’s, or defendant’s own, market research showing
the importance of such representations to purchasers.” Defendants’ documents
and testimony acknowledge that there is a “strong consumer desire for ‘natural’
products and ingredients” in the lip balm market generally. Internal marketing
research concluded that the “100% Naturals” ChapStick products “[t]ap[ ] into
consumer desire for [a] natural option,” finding “79% of lip balm users 18-34
[are] interested in [the] natural option.” The same percentage of consumers
identified ingredients as an “important” product-attribute; 59% of consumers
also identified how ingredients are sourced; and 57% identified that where
ingredients are sourced is “important.” Defendants’ other surveys rendered
similar results: one found “ ‘Natural’ is important in a product that promises
more than color and another found 65% of consumers place “importance” on
“[a]ll-natural ingredients.” This was enough to create common evidence of
materiality to a reasonable consumer.

However, a proposed
consumer perception survey didn’t separately establish common proof of
materiality. It failed to sufficiently isolate the challenged statements,
combining the “natural” terms with extraneous words such as “Lip Butter,” “Natural
with Argan Oil,” “Natural Age Defying,” etc. But the proposed survey was not
impermissibly leading merely because it asked “whether or not they understand
the specified statements on the product packaging to be communicating certain
meanings.”

Failure to isolate the
challenged statements in the proposed conjoint survey also made it incapable of
calculating a reliable price premium; the court suggested that it could grant damages
class certification on a renewed motion if there were a method that isolated
the challenged statements.

There was standing
to seek injunctive relief because the plaintiff still desires to buy natural
lip-care products and would like to buy them again, but doesn’t know whether
they are, in fact, natural, and she does not have the expertise to discern from
their ingredient disclosures whether the Challenged Statements are true.

from Blogger http://tushnet.blogspot.com/2024/03/conjoint-analysis-has-to-isolate.html

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disclaimers that require consumers to understand tech, history and law don’t avoid lawsuit over “flushable”

Posted on March 29, 2024 by rtushnet

Schotte v. Stop
& Shop Supermarket Co., 2024 WL 1251284, No. 1:23-cv-10897-IT (D. Mass Mar.
22, 2024)

Stop & Shop allegedly
deceptively advertised cleansing wipe products as “flushable” in violation of
Mass. Gen. Laws ch. 93A; Schotte also brought warranty, unjust enrichment, and
fraud claims. The court declined to dismiss the complaint.

The Stop & Shop Wipes, which vary in fragrance and style, are all
marketed and sold with bold, prominent font labeling them as “flushable” on the
front of the packaging. Following the word “flushable” on the front of all
packaging is a “†”and the text “For flushing see [back or bottom] panel” in
smaller print. The back or bottom panel sets forth the following statements in
even smaller print:

Independent lab testing shows these wipes meet INDA Flushable Product
Guidelines. Not all systems can accept flushable wipes. Ignoring Disposal
Instructions may lead to clogs, property damage, or regulatory violations.

DISPOSAL INSTRUCTIONS

Do not flush if:

• Violates local rules.

• Using RV, marine, or aviation system.

• Using macerator toilet or household pump.

• Fat or grease are put in any drain or you are unsure of system
capability

Flushing ok if:

• Permitted by local rules.

• One wipe per flush.

• No history of clogs or backups.

• Septic follows EPA schedule for alternative systems (annual
inspection & pumping).

If a problem is noticed, dispose of in trash and stop flushing.

The remainder of the
disclaimer is concealed by a tab; the concealed portion reads, in part, “not
all systems can accept flushable wipes.”

Schotte alleged a
“substantial price premium” of at least 25% more for the Wipes as compared to
non-flushable wipes from the same brands. Schotte also alleged that the wipes
are not in fact flushable because they do not “break apart or disperse in a
reasonable period of time after flushing, resulting in clogs or other sewer
damage.”

Stop & Shop
argued that this couldn’t deceive a reasonable consumer, both because of the
disclaimers and because flushable merely means “capable of being flushed down a
toilet,” regardless of what happens later on. (That’s not my department!)

“[W]hether a term
with multiple, contradictory definitions or interpretations has the capacity to
mislead is best left to ‘six jurors, rather than three judges, [to] decide on a
full record.’” To avoid a finding of plausible deceptiveness, disclaimers or
qualifications must be “sufficiently prominent and unambiguous …. Anything
less is only likely to cause confusion by creating contradictory double
meanings.” Here, a factfinder

could reasonably find that the disclaimer on the back of the Wipes
packaging is neither sufficiently prominent nor unambiguous and, instead, that
the small-print lists would not be noticed. And a factfinder could also find
that even if the lists were noticed, the disclaimers would require consumers to
have in-depth knowledge of the sewer or septic system they are using, its
plumbing history, as well as “local rules”—not just for a toilet in their
residence or office but any toilet they may wish to dispose of the Wipes in. A
reasonable jury could find the disclaimer so small and vague that it does not
relieve Defendant of any potential liability for its deceptive acts.

In addition, Schotte
alleged that he would be interested in purchasing the wipes again if Stop &
Shop ensured they were actually flushable, so he sufficiently pled a likelihood
of future injury to establish standing for injunctive and declaratory relief.

Side note: one court
has held that “flushable” is not sufficiently factual/uncontroversial to allow legislatively
required disclosures under Zauderer. I think that’s definitely wrong,
but it’s consistent with a pattern where courts allow themselves—or juries they
supervise—to find facts but don’t like legislatures doing so. Both courts and
legislatures are governmental regulators, though.

from Blogger http://tushnet.blogspot.com/2024/03/disclaimers-that-require-consumers-to.html

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adult venue’s insurer did not successfully exclude ads from ad injury coverage

Posted on March 28, 2024 by rtushnet

Princeton Excess &
Surplus Lines Ins. Co. v. R.I. Cranston Entertainment Inc.; 2024 WL 1285631, C.A.
No. 21-63-JJM-PAS (D.R.I. Mar. 26, 2024)

Defendant, d/b/a
Wonderland, operated an adult entertainment club and was one of the many such
sued by various models for using their images in advertising without their
consent from 2015 to 2019. Princeton insured Wonderland from 2016-2018 (with a
broad exclusion for defamation, invasion of privacy, and various forms of
advertising injury in the second year called the Exhibitions and Related
Marketing Exclusion), and agreed to defend the club but reserved the right to
deny insurance coverage. After settlement negotiations (including Wonderland’s
separate counsel), Wonderland agreed to a judgment for $1.895 million, with a
covenant not to execute and an assignment of rights against Princeton to the
models in lieu of payment. Princeton then sued Wonderland and the models,
seeking a declaratory judgment that it has no obligations under the Consent
Judgment. Defendants counterclaimed for payment and damages for breach of
contract and bad faith.

If policy terms are
“ambiguous or capable of more than one reasonable meaning, the policy will be
strictly construed in favor of the insured and against the insurer.”

Princeton argued
that (1) no coverage was available for claims during the 2017 to 18 Policy
Period; (2) Wonderland breached the insurance contract by agreeing to the
Consent Judgment in violation of the cooperation and non-assignment clauses;
and (3) the Consent Judgment was unreasonable, and thus unenforceable, as a
matter of law.

The consent judgment
was a lump sum and, Princeton argued, included uncovered claims; most of the images
fell within the 2017-18 period. The policy excluded personal and advertising injury,
including “publication, in any manner, of material that violates a person’s
right of privacy,” disparagement, use of advertising ideas, and trade dress
infringement, if such activities “arise out of or are part of ‘exhibitions and
related marketing,’ ” which are broadly defined.

The underlying claim
alleged false advertising and false association under the Lanham Act,
misappropriation, violation of the Models’ common-law and statutory privacy
rights, and defamation, “all of which fall squarely under Personal and
Advertising Injury. So the burden falls to Princeton to show that its exclusion
is valid.”

The problem was that
the policy and the exclusion were “clearly worded, specific, and directly
contradictory to each other. Under Rhode Island law, policy exclusions must be
unambiguous, and ‘contract provisions subject to more than one interpretation
are construed strictly against the insurer.’” Also, “Rhode Island courts will
not uphold an exclusion that leads to unreasonable results, particularly if
doing so will make another part of the coverage illusory.” The court found that
definition of “Exhibitions and Related Marketing” was so broad as to “preclude
coverage in almost any circumstance.” The Fifth Circuit recently found that,
even if all “advertising injury” was excluded by this exact policy language, “personal
and advertising injury” was an umbrella provision and not illusory because
there was still personal injury coverage. Princeton Excess & Surplus Lines
Ins. Co. v. A.H.D. Houston, Inc., 84 F.4th 274 (5th Cir. 2023); but see Princeton
Express v. DM Ventures USA LLC, 209 F. Supp. 3d 1252, 1258 (S.D. Fla. 2016) (declining
to uphold a “field of entertainment” exclusion on the grounds that it would
exclude “anything listed in (d) through (g) listed under Personal and
Advertising Injuries” and would thus make the Policies illusory as to
advertising coverage).

The court here
disagreed with the Fifth Circuit. By its plain language, “exhibitions”
encompass almost all forms of production and advertising: “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 ….” including social media, as
well as material produced “in any medium including videos, phonographic
recordings, tapes, compact discs, DVDs, memory cards, electronic software or
media, books, magazines, social media, webcasts and websites”— “a broad-ranging
definition that contradicts Princeton’s purported coverage” for “advertising”
(defined as “a notice that is broadcast or published to the general public …
about your goods, products or services”). And the exclusion also withdrew
coverage for all related forms of marketing. Rhode Island doesn’t allow
insurers to make whole sections of a policy illusory.

It also didn’t save
Princeton that exceptions purportedly restored coverage for advertising related
to Wonderland’s food and liquor services. Princeton argued that these
exceptions preserve coverage for “use of another’s advertising idea or
infringement of copyright, slogan, or trade dress in an advertisement for any
aspect of Wonderland’s business other than exhibitions or marketing for
exhibitions (such as its food or liquor service).” “But the Exhibitions and
Related Marketing Exclusion precludes coverage for any commercial, web
production, or promotional event, regardless of whether the advertisement
relates to a show, a theatrical performance, or purchase of a hamburger. It
would exclude the advertising examples that Princeton cites to make its case.”

Thus, Princeton owed
Wonderland a duty to indemnify for advertising injury arising out of
Exhibitions and Related Marketing under the 2017 to 18 Policy. Moreover, there
was no evidence that the consent judgment purported to settle claims outside
the policy period; it was based on Princeton’s denial of claims for that
period, and its plain language suggested that it was limited to that period.

The policy didn’t apply
to “[a]ny punitive damages, exemplary damages, or the multiplied portion of any
award, because of any ‘bodily injury’, ‘property damage’ or ‘personal and
advertising injury’.” But again, there was no evidence that the consent judgment
included these.

Princeton argued
that Wonderland breached the terms of the insurance contract by interfering
with its right to defend and settling the case in violation of the cooperation
and non-assignment clauses. But it was uncontested that Princeton knew about
the Models’ offer and took no steps to preserve its rights over the course of
many months, so it waived any objection to the terms of the settlement. Also,
there was a cooperation clause requiring cooperation in investigation and
settlement; this is a reciprocal obligation, and no reasonable jury could look
at Princeton’s conduct and find that it used “reasonable diligence” to obtain
Wonderland’s cooperation.

Finally, Princeton
waived its right to object based on the non-assignment clause:

We think the insured should be allowed, as soon as the insurer denies
coverage, to protect its interest by negotiating a settlement. The only
valuable asset the insured may have is its cause of action against the insurer
and the insured should be able to assign this right to the injured party to
protect itself from further liability.

Also, “because an
insured’s rights to proceeds vests at the time of loss … restrictions on the
insured’s right to assign its proceeds are generally rendered void.”

Was the consent
judgment collusive and unreasonable and thus unenforceable? No, there was no
evidence of misconduct. (Princeton was bound because the judgment fixed
Wonderland’s liability, triggering the duty to indemnify, and Wonderland
properly assigned its claims to the models.) Princeton pointed to statements
made by Wonderland’s manager, who stated that the offer of $10,000 per model
was “crazy” and was upset that Princeton “did not want to fight it.” It argued
that this was incompatible with Wonderland’s decision to settle all claims for
$1.895 million, and that the manager hadn’t read the consent judgment so
Wonderland could not have truthfully stated that it was reasonable.

“That a party may
have opposed a settlement does not render a settlement fraudulent or collusive.
And a party’s failure to read a contract does not render it unenforceable. A
party may rely on their attorney in drafting settlement documents, and the
attorney can be presumed to speak for them regardless of whether they have read
the documents.” Any concerns about collusion were “further assuaged by the fact
that the judgment was negotiated under the supervision and guidance of a
seasoned Magistrate Judge and that other courts have repeatedly found liability
on similar facts.”

But the complaint included
other policy exclusions that were not yet before the court (exclusions for
knowing falsity and the like), so defendants only got partial summary judgment.
 They were entitled to summary judgment
on liability for breach of contract (the duty to indemnify), but not on
damages.

from Blogger http://tushnet.blogspot.com/2024/03/adult-venues-insurer-did-not.html

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