consumer survey can’t make a scientifically wrong use of a term right

Posted on April 3, 2023 by rtushnet

Gunaratna v. Dennis Gross Cosmetology LLC, No. CV
20-2311-MWF (GJSx), 2023 WL 2628620 (C.D. Cal. Mar. 15, 2023)

Plaintiff challenged defendant’s “C + Collagen” claim as
falsely indicating that its product actually contained collagen.  

Defendant wants to make this action
about whether “collagen” means “collagen” and what consumers understand
“collagen” to mean. The problem for Defendant is that “collagen,” standing on
its own, is not some undefined, amorphous term — there is a widely-accepted
scientific definition describing collagen. Even Defendant’s own expert, when
pressed, defines collagen as a protein only found in animals.

This affected the expert testimony that would be admitted.

Defendant is free to [argue] that
the label does not convey that the products contain collagen and that the
presence of collagen is not material to consumers’ purchasing decision. But
Defendant is not free to offer its own definition of “collagen” unsupported by
any reliable science in the record.

Thus, portions of expert reports that “blindly adopt the
notion that ‘plant based collagen amino acids’ exist” would be excluded.

The role of a district court in screening experts is that of
“a gatekeeper, not a fact finder.” “An expert can appropriately rely on the
opinions of others ‘if other evidence supports his opinion and the record
demonstrates that the expert conducted an independent evaluation of that
evidence.’ ” And an expert may adopt his party’s version of the disputed facts,
“unless those factual assumptions are ‘indisputably wrong.’ ”

This is a putative class action against a skincare company
that allegedly falsely advertises products labeled “Dr. Dennis Gross C +
Collagen,” because they “(admittedly) do not actually contain any collagen, as
the word is typically and scientifically understood. Rather, the products
contain vegetable-derived amino acid molecules, which Defendant claims mimic
the structure of ‘hydrolyzed’ collagen. But collagen is a protein found
exclusively in the cartilage, bone, and tissues of animals, fish, and humans,
and is not found in plants.” There’s a market for collagen-containing products
because it’s been linked to maintaining youthful skin, hair, and nails.

Defendant argued that its labels weren’t false because consumers
understand “C + Collagen” to mean that the products contain Vitamin “C” (which
it does), and Vitamin C boosts (“+”) the body’s natural production of
“Collagen.” Plaintiffs pointed out that “+” is commonly used in the industry to
indicate “and” not “boosts.”

Defendant also argued that the products actually contain
plant-sourced “collagen amino acids,” that is, amino acids derived from corn,
soy, and wheat, not from collagen, but that are 
chemically and functionally identical to amino acids from hydrolyzed
animal collagen. Plaintiffs argued that, if so, defendant should have invested
in marketing to explain to consumers that plant-based amino acids have similar
anti-aging attributes as does collagen. As long as consumers, whether logically
or not, attach value to the label “collagen,” the labels distort the available
information in the market and gives a price premium to the product.

The court accepted plaintiffs’ expert Dr. Fetzer’s opinion
that the amino acids weren’t “collagen amino acids.” This was not about
equivalence but about origin. He opined that, even if there were some
similarities between the vegetable amino acids in the products and real
collagen, calling the amino acid solution within the products as “collagen” or
“collagen amino acids” is “analogous to stating that a collection of the 26
letters of the alphabet in approximate proportions to those of Shakespeare’s
Hamlet mean that those letters must have really been from a text of Hamlet.”

To rebut this chemist’s opinion, defendant offered the
opinions of a dermatologist, but they weren’t supported by the record. Her
opinion as to the products’ overall efficacy was only relevant to the issue of
damages, not falsity or deception. Her interpretation of what “Collagen + C”
conveys was not relevant to the reasonable consumer test (and also tended to
support plaintiffs anyway). However, to the extent that defendant could show
that reasonable consumers interpret the term as meaning that the product boosts
collagen rather than containing collagen, her opinion would be relevant to show
that was true. But her opinion that the supposed vegetable collagen was
equivalent to actual hydrolyzed collagen was excluded; she was not a chemist,
has not researched equivalency of hydrolyzed solutions or plant protein
hydrolysis, and didn’t have expertise in chemical industry standards for
equivalency.

However, the court didn’t exclude her opinions as biased just
because she was an endorser and user of the products.

Both sides offered surveys; ordinarily, the court would
consider them both admissible because the objections went to the weight of the
evidence. But the defendant’s survey and its objections to plaintiffs’ survey
were based on the excluded opinions regarding the chemical composition of the
products. Defendant’s view of the facts — that it is accurate to call its solution
“plant-based collagen amino acids” — was explicitly rejected by the only expert
who is a qualified chemist and was otherwise unsupported by any admissible,
scientifically-sound evidence. Saying that a product has “plant-based collagen
amino acids” is not the same as saying it has “the equivalent” or a “synthetic”
version of collagen. It was like arguing that watches made in Japan can be sold
with a label “Made in the USA,” just because the watches are just as effective
as those made in the USA. “By saying amino acids are ‘collagen’ amino acids,
Defendant is representing that the amino acids are derived from collagen.
Otherwise, what makes the amino acids ‘collagen amino acids’?” Not any amino
acid in collagen is a “collagen amino acid,” at least by the admissible
testimony and common sense. “One cannot claim something has water in it just
because it has some amount of hydrogen.”

But the Ninth Circuit has instructed courts to be very
generous with consumer surveys. Still, there is Daubert, and “the low
bar imposed on consumer surveys has been described in contrast to novel scientific
theories,” but here the survey was the vehicle for introducing such a theory.
Thus, defendant’s survey expert’s assumption that “plant based collagen amino
acids” exist and, moreover, that this full phrase appeared on the products, “deeply
infects the results of her survey and would confuse the issues for any jury.”

Defendant has not shown by
admissible evidence that what “collagen” means is up for any real scientific
debate. While consumers and laypersons may not have a scientific understanding
of where collagen comes from – the question “what is collagen?” has but one
accurate answer, and more importantly, is not the issue in dispute at least on
the issue of falsity/deception.

Defendant challenged plaintiffs’ survey on various grounds.
The survey used respondents who had purchased personal care and beauty products
in the last 6 months and asked them whether they understood the product labels
to mean that the products contained collagen. He then asked whether, they would
be more or less satisfied with their purchase, or more or less likely to buy it
again, after learning that the products contained no collagen and only
contained amino acids. He also asked the respondents whether, after learning
that the product contained no collagen and only contained amino acids, they
would be more or less likely to purchase the product again. The expert
concluded that over 95% of respondents understood the front label to mean that
the products contain collagen, and 51.7% of respondents indicated that they
would be “much” or at least “somewhat less satisfied” if they learned
otherwise. This adequately tested deception and materiality, even if it didn’t
test reliance.

Defendant argued that the respondents weren’t representative
because its consumers are high-end, sophisticated product purchasers and
therefore the population was non-representative. But it wasn’t clear why that
would be a problem, given that more sophisticated shoppers “are likely more
aware of, and perhaps specifically desire, the benefits of collagen products,”
so this just went to weight rather than admissibility.

Meanwhile, the central question in defendant’s survey was:

Q13. Based on your understanding of the product, which of
the following, if any, describes what C + Collagen means? 

(Select all that apply)

1. Product contains Vitamin C which increases collagen

2. Product contains animal collagen

3. Product contains plant-based collagen amino acids

4. Something else (Please specify): ___ 

5. None of these [EXCLUSIVE]

6. Don’t know / unsure [EXCLUSIVE]

Defendant’s expert concluded that “the majority of
purchasers [surveyed] understand that C + Collagen means the product contains
Vitamin C” (49.7% selected “Product contains Vitamin C which increases
collagen). And the “next most common interpretation of C + Collagen was that
the product contains “plant-based collagen amino acids” (37.2%), while only
26.4% indicated that C + Collagen meant that “the product contains animal
collagen.”

The survey also asked materiality questions assuming that
plant-based collagen amino acids were real, and purportedly found that 58.5% of
consumers wouldn’t care—and of those who did care, only 3% would be less likely
to buy plant-based products.

But nothing in defendant’s survey tested plaintiffs’ theory
of the case: that the label conveys that the products contain both Vitamin C
and collagen. “So, the fact that most individuals picked the answer choice
indicating that they interpreted the label to mean Vitamin C boosts collagen is
unsurprising given it is the only answer that contains both Vitamin C and
collagen.  The fatal flaw was that the survey used the junk science that the court
was supposed to keep out of the courtroom: “the questions introduce a substance
that does not exist in the real world or even appear as a phrase on the
Products’ packaging.” 

The survey “tested whether consumers understand where
collagen comes from,” but that was different from the argument that “consumers
value the word ‘collagen’ itself – whether consumers understand the science or
not,” which allowed the defendant to charge inflated prices. Thus, the expert’s
opinions and conclusions related to these questions were excluded as to falsity
and materiality, as were her critiques of other experts based on their failure
to test the concept of “plant based collagen amino acids,” The remaining
aspects of the report (such as the reliance questions/answers) were admissible.

from Blogger http://tushnet.blogspot.com/2023/04/consumer-survey-cant-make.html

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lidocaine patch, allegedly not “maximum strength,” gives Walmart some pain

Posted on April 3, 2023 by rtushnet

Rodriguez v. Walmart Inc., 2023 WL 2664134, 22-CV-2991 (JPO)
(S.D.N.Y. Mar. 28, 2023)

This is another lidocaine lawsuit finding that plaintiffs
stated a claim under New York’s GBL based on allegedly false advertising that
Walmart’s patches and creams deliver a “maximum strength” dose of lidocaine and
with respect to the patches, function as a “stay-put flexible patch” that
“lasts up to 12 hours.”

Plaintiffs alleged that other over-the-counter and
prescription lidocaine creams and patches deliver a higher concentration or
amount of lidocaine and the lidocaine patches do not contain a higher dose of
lidocaine than competing patch products without the “maximum strength” label. In
addition, the patches allegedly systematically fail “by large margins” to
adhere to users’ bodies for 12 hours; fail to continuously relieve pain during
that period because of the premature detachment; and are insufficiently
flexible to withstand daily activities such as walking, stretching, and
sleeping.

It was plausible that a reasonable consumer would understand
“maximum strength” to mean that the patch product contains the maximum amount
of lidocaine available on the market for that type of product. Walmart’s
arguments that prescription-strength patches are not proper comparators and that
plaintiffs used erroneous calculations couldn’t be resolved on a motion to dismiss.
And “max strength” was equivalent to “maximum strength.”

Whether “stay-put flexible patch” was non-actionable puffery
couldn’t be resolved at this stage. It wasn’t too vague to be actionable; “[w]hether
the patch tends to remain adhered to users’ skin and flex along with their
movements during a typical period of use is an objective question.” And the
phrase wasn’t “so patently hyperbolic that it can be deemed puffery as a matter
of law.”

Similarly, “lasts up to 12 hours” was plausibly misleading:

After reading directions that state that a user should use
one patch for “up to 12 hours,” a reasonable consumer would indeed plausibly
expect to be able to use a single patch for a period approaching 12 hours.
Further, Plaintiffs do not allege that 12 hours is a guarantee; rather, they
allege that the patches systematically fail to adhere for a time period close
to 12 hours.

Plaintiffs also plausibly alleged material omissions by
failing to disclose that the patches are “prone to even greater detachment when
[consumers] engage in moderate exercise or other regular daily
activities.”  Walmart argued that it had
no obligation to state the obvious — that is, that the patches could detach
when the user is mobile. But “[j]ustifiable reliance by the plaintiff is not an
element of [a] statutory claim” under GBL § 349 or § 350.

 

 

from Blogger http://tushnet.blogspot.com/2023/04/lidocaine-patch-allegedly-not-maximum.html

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“Paris” on makeup doesn’t itself indicate origin

Posted on March 31, 2023 by rtushnet

Eshelby v. L’Oréal USA, Inc., 2023 WL 2647958, 22 Civ. 1396
(AT) (S.D.N.Y. Mar. 27, 2023)

Eshelby sued L’Oréal over its use of “Paris” (including as
part of the brand name “L’Oréal Paris”) and French-language text in ads and on
the front of packages when the products aren’t made in France. They say in fine
print on the back or side of the packaging that they are manufactured in the
United States or Canada. She alleged that American consumers associate French
products with high quality and luxury such that consumers are willing to pay a
premium for French products, and further that other cosmetic products sold in
the United States that display the word “Paris” are manufactured in France, making
this deceptive to reasonable consumers. She brought the usual
California claims and some others, but the court dismissed them all.

Some of the accused products didn’t have other French words
on them. “As a matter of law, a mere reference to Paris is insufficient to
deceive a reasonable consumer regarding the manufacturing location of a
product.” Plus:

The word “Paris” always appears in
stylized text underneath the word “L’Oréal,” in the same font and color as the
word “L’Oréal,” such that a reasonable consumer would understand that “Paris”
is part of the brand name “L’Oréal Paris.” … And, although a reasonable
consumer may infer from the brand name that the company originated in Paris, a
reasonable consumer would not also conclude that a particular product is
manufactured in Paris, or elsewhere in France—particularly because each product
also contains a disclosure on the back label stating the manufacturing
location.

What does this mean for geographic deceptiveness or
misdescriptiveness refusals, especially in light of the greater constitutional
scrutiny given to refusals after Tam and Brunetti?

Reasonable consumers may not have to look for corrections to
misleading matter on the front of the label, “but the front label on the
products Eshelby purchased do not make any actual representations about country
of manufacture; rather, Eshelby inferred from the word ‘Paris’ and the
French-language text that the products were manufactured in France. The front
label is not so misleading that a reasonable consumer who cared about the
country of manufacture should not be expected to look at the full packaging for
a disclaimer, which was clearly and correctly provided on the labels of each
product Eshelby purchased.”

Even the addition of other French-language text was
insufficient. Although she pointed to two other products with French names that
were made in France, she didn’t allege “that the examples she points to are
comparable to the haircare and makeup products she actually purchased, i.e. in
terms of retailers, price point, or target audience.” Also, they presented
their French text differently, with product names in French, and the
French-language descriptions preceding the English translations. The L’Oréal
products use product names in English only as well as large/preceding English
descriptions, making it implausible that they were made in France for French
consumers. And there was nothing on the labels making explicit claims about
country of manufacture except the truthful disclosures on the back.

“The mere presence of words in a foreign language is
insufficient to mislead a reasonable consumer.” [Citing a case about Spanish;
is that really generalizable to all languages?]

Amending the complaint to include allegations about a survey
supporting her claims would be futile because “[a] plaintiff cannot rely solely
on consumer surveys to state a claim.” Anyway, the survey only showed
respondents the front of the product, and omitted responses stating that, based
on the front label of the product, the respondent does not know where the
product was manufactured.

from Blogger http://tushnet.blogspot.com/2023/03/paris-on-makeup-doesnt-itself-indicate.html

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(c) ownership claim allows both (c) and Lanham Act claims on motion to dismiss

Posted on March 31, 2023 by rtushnet

Estate of Henry Joseph Darger v. Lerner, 2023 WL 2664341, No.
22 C 03911 (N.D. Ill. Mar. 28, 2023)

Darger “was an artist who died in obscurity but whose work
received significant posthumous acclaim.” The Estate alleged that his copyrights
were wrongfully claimed for nearly 50 years by Darger’s landlords. The court
denied a motion to dismiss on copyright and trademark etc. claims; the latter
trouble me for obvious Dastar reasons.

Darger had a tough life, including institutionalization. “From
approximately 1930 until 1973, when he moved to a care facility and shortly
thereafter passed away, Darger lived in a room at 851 West Webster in Chicago’s
Lincoln Park neighborhood. Darger’s landlords from approximately 1960 to the
end of his life in 1973 were Nathan and Kiyoko Lerner.”

When he died intestate, he left
behind in his apartment a 15,000-page epic fantasy novel called In the Realms
of the Unreal, about a civil war between children and abusive adults, which
included approximately 300 pages of watercolor, pastel wash, pencil, and
collage illustrations. He also wrote other expansive works …. Darger’s works
posthumously became well-regarded in the genre of “outsider art” (art by
self-taught artists who have no contact with the mainstream). “His works are
known for using a vibrancy of color and vivid composition.” Today, a single
illustration from In the Realms of the Unreal regularly sells for $200,000 to
$400,000 and has been known to fetch as much as $750,000. His illustrations
have also been featured in books, teaching materials, commercials, films, and
museums around the world.

“Upon Darger’s death, the Lerners took control of his works
under the allegedly false pretense that he had gifted the physical copies of
his works and their associated copyrights to them.” They also used Darger’s
name, identity, and likeness to “exploit” his works and by registering the
domain name “officialhenrydarger.com.”

In 2022, a distant relative was appointed as administrator
of the Estate, which then sued.

Defendants’ primary argument was laches/statute of
limitations, but those are affirmative defenses usually not appropriate for a
motion to dismiss, and it was conceivable that they didn’t apply. “First, under
the separate-accrual rule which applies to the Copyright Act, the statute of
limitations runs from each successive violation.” Thus, defendants were
allegedly currently violating the Copyright Act, Landham Act, and state IUDTPA.

Second, the discovery rule might apply. It was reasonable to
infer that the Estate didn’t have a reasonable basis for learning of
defendants’ conduct until recently, given the allegations of “the difficult
circumstances of Darger’s childhood which cut him off from any extended family;
that he lived a solitary life working “menial” jobs; that he died intestate;
that his art, though posthumously well-regarded, is mainly known in the niche
genre of ‘outsider art,’; and that Sadowski was appointed administrator of the
Estate by the Cook County Probate Court in only 2022.”

Copyright ownership: At this stage, the court accepted as
true the allegation that Darger did not gift his works to the Lerners. Given
that the disputed transfer was pre-1978, it was governed by the common law. “A
transfer of a common law copyright did not need to be in writing.” Still,
though a transfer of the material object could normally evidence an intent to
transfer the underlying common law copyright, the issue was always the intent
of the transferor. Nimmer even uses a relevant example: “if author A submits a
story to editor E at a magazine for consideration … E waits decades until A
is dead; and then E publishes it under a purported grant from A, there is scant
reason to credit the necessary ingredient of A’s intent to convey copyright
ownership.”

Does copyright preempt the Estate’s equitable easement and
IUDTPA claims? The first claim sought physical access to create an alternative
master; this was a substantively different right than copyright, so not
preempted. The second was, according to the court, not a preempted reverse
passing off claim, but instead based on Kiyoko Lerner falsely holding herself
out to consumers as a representative of the Estate. “Making such a
misrepresentation about one’s affiliation, by itself, is not among the
exclusive rights enumerated in § 106 of the Copyright Act.” [But depending on
what she actually said, Dastar or conflict preemption might be quite
relevant.]

Lanham Act false designation of origin, unfair competition,
and cybersquatting: The complaint identified Henry Darger’s name as the
relevant trademark (I don’t see how the Estate can plausibly claim to own it as
a mark, but ok). “[W]hether Kiyoko Lerner has a registered trademark in
Darger’s name is outside the four corners of the Complaint and is therefore a
factual dispute and not properly considered on a motion to dismiss.” And likely
confusion can’t be assessed at the motion to dismiss stage, nor were plaintiffs
required to allege specific facts establishing bad faith for cybersquatting at
the pleading stage. Still seems to me like they’re heading for fatal Dastar
problems.

from Blogger http://tushnet.blogspot.com/2023/03/c-ownership-claim-allows-both-c-and.html

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Third Circuit follows Second in protecting medical journals against trade libel claims

Posted on March 27, 2023 by rtushnet

Pacira Biosciences, Inc. v. American Soc’y of
Anesthesiologists, Inc., — F.4th —-, 2023 WL 2621131, No. 22-1411 (3d Cir.
Mar. 24, 2023)

Courts in particular kinds of false advertising cases say
that scientific claims are not falsifiable, even as the majority of workaday false
advertising claims involving scientific fact are (correctly) treated as falsifiable.
The rule seems to be that scientific claims directed at sophisticated
audiences, to whom details of the claims are disclosed, are treated as opinion,
whereas scientific claims in standard consumer advertising are treated as
factual. This may well be justified because of the different ways in which such
claims are perceived, but it also smacks a bit of those old cases that held
that educated men could be allowed access to things that would be obscene as to
their footmen and housemaids.

Anyway, Pacira sued ASA, the editor-in-chief of its medical
journal, and the authors of three articles for statements made about one of
Pacira’s drug products, for trade libel under New Jersey law. The court of
appeals affirmed a finding that the statements were nonactionable opinion.

Pacira makes Exparel, a local anesthetic administered at the
time of surgery to control post-surgical pain; Pacira claims that it offers
longer lasting pain relief than standard local anesthetics. The challenged
statements conveyed defendants’ view that Exparel was not superior or was even
inferior to standard analgesics for pain relief. E.g., the cover of the
February 2021 issue of Anesthesiology stated that “Liposomal Bupivacaine Is Not
Superior to Standard Local Anesthetics.” Pacira challenged three articles: (1)
a meta-analysis of studies of Exparel, which concludes that the drug is “not superior”
to standard anesthetics; (2) a narrative review of clinical trials involving Exparel,
which reaches a similar conclusion; and (3) an editorial based on the
meta-analysis and narrative review.

Pacira had specific complaints about each article, including
that the first one cherry-picked studies; employed a “flawed method” known as
“crude pooling,” in which results from different studies using different
popoulations are grouped together; and violated “the standards of medical
research” by failing to account for the statistical heterogeneity in
population, medication type, outcome definition, and design of the studies on
which it relied. Similarly, the narrative review allegedly failed to discuss
the “most relevant anesthesia procedure,” ignored favorable studies with
minimal explanation, and two of its authors failed to disclose financial
conflicts of interest.

The ASA’s Continuing Medical Education program allowed
participants to answer questions based on the articles and receive credit to
satisfy medical licensure requirements. Pacira alleged that these questions
restated as fact the articles’ conclusions, including that Exparel is
“inferior” to standard anesthetics and that studies favoring it are biased.

In sorting potentially actionable fact statements from
opinion, courts consider the (1) content, (2) verifiability, and (3) context of
the statements.

Content: “Not superior” and “inferior”  were the type of “loose” or “figurative”
language that the New Jersey Supreme Court has said is “more likely to be
deemed non-actionable as rhetorical hyperbole.” (This seems like a overgeneralization
of what those terms mean in the abstract, unaccompanied by more specifics—those
types of words are generally opinion on their own, but here the context is one
of analyzing relative efficacy; the court is atomizing the claim in order to reject
it.) In a footnote, the court relied on past precedent: “If a statement could
be construed as either fact or opinion, however, we must construe it as an
opinion. A contrary presumption would ‘tend to impose a chilling effect on
speech.’” Also, that most of the cases it cited were false advertising cases

strengthens, not undermines, our
conclusion that the statements here are nonactionable opinions. Commercial
advertisements are directed at consumers, whereas peer-reviewed academic
journals are generally “directed to the relevant scientific community.” ONY,
Inc. v. Cornerstone Therapeutics, Inc., 720 F.3d 490, 496-97 (2d Cir. 2013). If
New Jersey courts have concluded that statements of relative superiority would
not mislead an average consumer, then similar statements made in an academic
journal will not mislead the experts reading the journal. See Eastman Chem. Co.
v. Plastipure, Inc., 775 F.3d 230, 236 (5th Cir. 2014) (holding disputed
statements made in sales brochures were actionable because “Eastman did not sue
Appellants for publishing an article in a scientific journal. Rather, Eastman
sought to enjoin statements made in commercial advertisements and directed at
customers”).

Verifiability: The statements here weren’t verifiable. (I
suspect the doctors targeted would be surprised to hear that their CME wasn’t
actually telling them verifiable information. Arguably, this line of cases
highlights one way in which the collapse of any kind of consensus reality has
damaged the First Amendment.) First, they were “tentative scientific
conclusions and were expressly disclosed as such.” Adopting the reasoning of ONY,
the court reasoned that the statements, though theoretically provable, were nonetheless
still “tentative and subject to revision, because they represent inferences
about the nature of reality based on the results of experimentation and
observation.”

[“that’s just, like, your opinion, man” from The Big Lebowski]

Of possible interest: Cf. to Daubert’s statement: “Scientific
conclusions are subject to perpetual revision.” But in Daubert, that conclusion
is part of the reason that we let factfinders resolve factual disputes. Also,
in a footnote: “One court has recently observed that if there is consensus on a
scientific issue, then a statement about the issue may be deemed verifiable.
Conformis, Inc. v. Aetna, Inc., 58 F. 4th 517, 533 (1st Cir. 2023).” [This is a
product disparagement case that, in some significant tension with ONY
and the case at bar, finds the statement that a treatment is “not clinically
effective and not accepted by doctors and insurance providers as a standard
treatment” is at least potentially factual for purposes of surviving a motion
to dismiss. The court’s references to Plastipure and this case strengthen my conviction that this is a special rule: statements that are in fact verifiable will nonetheless be treated as opinion when made in scholarly format with sufficient detail about their limitations. I don’t think this is wrong as a result, I just wish the rule were stated more clearly.]

However, the broad statements above are probably limited by
the following discussion of the “express[]” qualifications of the challenged
materials. “For example, immediately before concluding that EXPAREL is not
superior to standard analgesics, the Hussain Article enumerates five ‘notable
limitations’ of its study, including ‘variabilities’ that ‘may have played a
confounding effect,’ ‘publication bias’ in selecting studies, and statistical
limitations due ‘to scarcity of data.’” The second article ended, “[h]owever,
medicine is constantly evolving with ongoing research, and the use of [EXPAREL]
for postoperative analgesia will certainly be no different.” It then identifies
several “knowledge gaps for future research,” including improving comparative
data for certain metrics.

Anyway, Pacira’s allegations “boil down to disagreements
about the reliability of the methodology and data underlying the statements,”
which isn’t the same thing as verifiability…. [M]ere disputes about the
reliability of a scientific study’s disclosed methodology cannot create an
actionable falsehood for trade libel, as such disputes do not address whether
the statements themselves are verifiable.” [There were no allegations of faked
data or the like.] Allegedly undisclosed conflicts of interest weren’t relevant
to falsifiability, even if relevant to actual malice.

Another footnote tries to preserve ordinary Lanham Act cases:
“For [establishment] claims, literal falsity may be established by showing that
‘the underlying studies upon which the representations are based are not
sufficiently reliable to permit one to conclude with reasonable certainty that
they established the claim made.’” [Um, the court just said above that
reliability was different from verifiability—why wouldn’t those claims still be
unverifiable even if unreliable? Immediately after this footnote, in text it
says: “It is only after establishing the statements can be proven true or false
that reliability of the underlying data and methodology may become relevant.”
Separately, if the claim isn’t an establishment claim—it doesn’t expressly or
by implication claim scientific backing—it has, historically, been possible to
falsify it by proving the contrary with scientific evidence.]

The real justification for calling these statements opinion,
which the court gets to next, is that these disputes should be kept out of the
legal system in order to avoid chilling scientific research and discourse. [What
happens when plaintiff’s competitors disseminate these articles as part of
their own self-promotion? The commercial/noncommercial speech distinction can
handle this, but defamation/trade libel may be ill-suited to do so.]

Context also pointed in favor of calling these statements
opinion: This was “a peer-reviewed journal for anesthesiology specialists.
While statements are not protected solely because they appear in a
peer-reviewed journal, such journals are often ‘directed to the relevant
scientific community.’ Their readers are specialists in their fields and are
best positioned to identify opinions and ‘choose to accept or reject [them] on
the basis of an independent evaluation of the facts.’” More generally, “statements
directed at readers who are capable of performing an independent evaluation of
the facts upon which an opinion is based support the conclusion that the
opinion is nonactionable.”

The court pointed out that “the readers were provided with
the data and methodology on which the statements were based.” [Note that if no
one is likely to do their own research, that may not matter, just as no one
really reads lots of other disclosures. Also, doctors are actually
not statistics experts, in general, and are just as vulnerable as the rest
of us to being spun.]

from Blogger http://tushnet.blogspot.com/2023/03/third-circuit-follows-second-in.html

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“Safe” not puffery in context of electric dog collars

Posted on March 27, 2023 by rtushnet

Hernandez v. Radio Systems Corp., No. EDCV 22-1861 JGB (KKx),
2023 WL 2629020 (C.D. Cal. Mar. 9, 2023)

Hernandez brought the usual
California claims against RSC for  allegedly false and misleading advertising of
its electric collar products for pets under the brand name PetSafe. He
allegedly bought them because he believed that they were safe, effective,
harmless, and an appropriate tool for training household pets based on the
packaging and advertising of the products, e.g.:

SAFE CORRECTION: When your pet
enters the “off limits” area, the transmitter sends a safe static correction to
their receive collar.

SAFE CORRECTION: When your pet
enters the barrier area, they feel a safe, progressive static correction,
starting at the lowest level; includes automatic safety shutoff.

SAFELY CORRECTS YOUR PET: When your
pet enters the boundary area wearing the receiver collar, they will hear a
series of beeps and then will receive a safe yet startling static correction.

He also viewed the PetSafe logo, “Safe Pets Happy Owners,”
as reassurance that the products were safe. In addition, the packaging of
PetSafe electric fence systems prominently display the following question and
answer:

Will it hurt my pet?

NO. The correction is delivered
when a pet crosses the established boundary zone. It is designed to get your
pet’s attention, but not punish him. This method has been proven safe and will
not harm your pet.

He alleged that, after using the product, he noticed that
his dog’s personality was more subdued than normal and that she had lost her
appetite. He identified a sticky residue and a foul burning smell around his
dog’s neck, and discovered that a patch of fur was missing from her neck. His
veterinarian identified holes in the dog’s neck that coincided with the
electrode inserts in the PetSafe Products.

Hernandez thus alleged that claims that the PetSafe Products
are “safe” and “harmless” are false and misleading because they (a)
misrepresent the dangers and risks of severe physical harm and injury to pets
associated with the use of the Products; (b) misrepresent the dangers and risks
of psychological damage, including anxiety, stress, and depression, to pets
associated with the use of the Products; (c) misrepresent the dangers and risks
of increased aggression and behavioral problems in pets associated with the use
of the Products; and (d) misrepresent that the Products are humane or are
recommended by industry experts. Instead, he alleged that an “overwhelming body
of scientific research confirms that being trained through electric shock is a
stressful and painful experience for dogs.” However, he would allegedly be
willing to purchase PetSafe Products if they were in fact safe, harmless, and
humane.

In this context, representations that the products were
“safe,” “comfortable,” “effective,” “harmless,” and “humane” were not puffery. While
only “misdescriptions of specific or absolute characteristics of a product are
actionable,” allegedly false claims that “explicitly or implicitly address
product attributes of importance to customers” are not puffery. “Representations
concerning the health and safety effects of products are ordinarily important
to consumers such that false advertising claims based on them should survive
dismissal.”

While defendant argued that products weren’t “inherently
dangerous or hazardous,” a reasonable consumer may disagree. “When a seller
represents that [an electric collar] is ‘safe’,’ a reasonable consumer may
understand that to be a concrete representation that, at the very least, the
[electric collar] will not [harm the pet] when used correctly.”

Likewise, the court couldn’t conclude that there would be no
deception as a matter of law. RSC argued that no reasonable consumer would
assume that the PetSafe Products are “risk-free” because the packaging and
product manuals disclose the relevant safety risks, including skin damage. But
small print can’t cure deception of reasonable consumers, nor can disclosures
in product manuals. Further, “brand names by themselves can be misleading in
the context of the product being marketed.” “Defendant’s descriptive brand
name, PetSafe, requires ‘little thought’ of the consumer and implicitly assures
consumers that the Products are safe.”

The court also declined to reject the request for injunctive
relief.  Fernandez alleged that he’d want
to purchase them in the future, but can’t know if the ads are accurate. That
was enough. (This strikes me as out of the mainstream—it would seem to require
a reformulation of the product for him to change his mind, as opposed to
accurate labeling.)

from Blogger http://tushnet.blogspot.com/2023/03/safe-not-puffery-in-context-of-electric.html

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Protecting Creativity with a Bottle of Jack on the Floribama Shore (and tiny JDI oral argument observations)

Posted on March 24, 2023 by rtushnet

Media Law Resource Center conference, Southwestern Law
School

Kevin Vick, Jassy Vick Carolan LLP (Moderator)

Just a few panel notes since I’m not going to recap Rogers or
MFGB v. Viacom.

Evynne Grover, Vice President, Media Liability Claims
Practice Leader, QBE North America: Rogers is incredibly important for
clearance. It gives us confidence in insuring productions. It can be applied on
a MTD, which costs $50-$175,000 but that’s much less expensive than going to
summary judgment. It allows us to clear more productions, support more speech,
and charge lower premiums. W/Rogers, 85% of threat letters go nowhere, and the
rest go away quickly. If we take away Rogers, we’re facing lengthy litigation,
losing settlement leverage, lose MTD opportunities, which would substantially
increase the costs of defense that are now low. Would have to be factored in to
premiums and retentions, and could make insurance cost-prohibitive for some
creators.

Susan Kohlmann, Jenner & Block, counsel for Viacom/MTV
in MFGB Properties v. Viacom: emphasizes the cost and burden of discovery in
having to go through all the depositions etc. Rogers would have counseled early
dismissal.

Lynn Jordan, Kelly IP, amicus counsel for the Motion Picture
Association in MFGB Properties v. Viacom: MFGB is a case that couldn’t have
been litigated by an independent filmmaker because of the highly burdensome
discovery/costs of defense.

Guilio Yaquinto, Pirkey Barber PLLC, amicus counsel for the
American Intellectual Property Law Association in Jack Daniel’s: wants to
distinguish commercial products from speech.

Rebecca Tushnet, Professor of Law, Harvard Law School

A test that deems this toy confusing with Jack Daniels is a
bad test. And it’s a bad test for the toy for the same reason that the
multifactor test is bad for movies and books: because that’s not how people
interact with products that are purchased for expressive purposes; people buy
this dog toy because it’s funny, because of its expression.

Cohen v. California: Paul Cohen was arrested for wearing a
jacket that said fuck the draft. The Supreme Court understood that because he
was arrested for his expression, the fact that it was on a jacket was not relevant.
[I admit that the Court seemed to think that T-shirts were different from dog
toys.]

I want to drill down on the (oft-heard) statement “Most
reasonable people won’t think the TM owner is making fun of itself.” Where’s
your evidence of that? Walmart’s WalQaeda survey said otherwise, finding 59%
confusion over WalQaeda and Walocaust T-shirts with plenty of other criticism
of Walmart on them, using the same questions asked in the VIP case. The jurisprudence
on confusion over affiliation means that the claim about successful parodies being
nonconfusing is not going to survive actual ligitation. Alito showed some
interest in treating the reasonable consumer test as an objective standard, which
it often is in other First Amendment areas, which could handle both the dumb
surveys and the larger problem of circularity (if consumers think that the law
is that parody or any reference to a TM owner requires permission, then the law
will require that permission if Jack Daniels has its way).

Q: on as applied challenges? RT: That seemed unappealing; if
you have hundreds of as applied challenges eventually you get a rule, which would
likely be something like Rogers.

Kohlmann: Registration is different from infringement, which
made the references to PTO practice sort of mysterious.

[While I’m here, other stuff I particularly noted about the Jack Daniels oral argument:

Sotomayor’s point that Polaroid isn’t in the statute either!
And that’s important because Polaroid works really badly for expressive uses; Rogers
can be a substitute test for finding when material confusion is likely, and when it’s not, given
the special characteristics of noncommercial speech.

Use as a mark: Justice Jackson seemed interested in an intuitive
concept of use as a trademark, but most lower court cases (with the partial
exception of the 6th Circuit) don’t accept that as a question
different from whether confusion is likely: They reason that, if confusion is
likely, then there is use as a trademark. More generally, I think it is easy to
get entangled in lay ideas of what trademark infringement means (something like
counterfeiting), which trademark claimants have exploited to expand rights far
beyond passing off.

The faux amis of use in commerce, commercial use, and
commercial speech showed up a bit; the Court seemingly well understood that
selling T-shirts could be protected speech if the regulation was imposed on the
shirts because of the expression printed on them, but no one seemed confident
of where the line was. Perhaps that’s the thing that should be done on a case
by case basis.

Small points about JDI’s claims:

Gone with the Wind isn’t a trademark? Has anyone told
Turner Entertainment Corp. which holds a registration for, inter alia,
“books”?  So too with the claim in
rebuttal that TikTok videos aren’t use in commerce—they very much are, even though
many are not commercial speech; this is the faux amis problem.]

from Blogger http://tushnet.blogspot.com/2023/03/protecting-creativity-with-bottle-of.html

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Another digital “buy” button case survives motion to dismiss

Posted on March 23, 2023 by rtushnet

McTyere v. Apple, Inc, 2023 WL 2585888, No. 21-CV-1133-LJV
(W.D.N.Y. Mar. 21, 2023)

Plaintiffs alleged that Apple made false representations
when it “sold” them digital content on the iTunes Store only to later remove
their access to that same digital content. They claimed violation of sections
349 and 350 of the New York General Business Law, as well as unjust enrichment.
Consumers can “rent” movies from Apple on the iTunes Store for about $5.99, but
the “buy” option costs much more. “Regardless of which device is used to access
digital content, or which ‘iTunes’ app is used to buy or rent the digital
content, the app provides a tab or folder labeled ‘purchased.’ ” But when third
parties terminate their licensing agreements with Apple, Apple “must revoke [a]
consumer[’s] access” to purchased digital content “without warning.” Plaintiffs
alleged that if they had known about the possibility that Apple might later
revoke access to already-purchased content, “they would not have bought [ ]
digital content from [Apple] or would have paid substantially less for it.”

Apple was not collaterally estopped from raising arguments against
liability that were rejected in Andino v. Apple, Inc., 2021 WL 1549667 (E.D.
Cal. Apr. 20, 2021), given that the claims arose under “completely different
state laws.”

Apple argued that it wasn’t misleading to say “buy,” because
to “buy” something means to “acquire possession, ownership, or rights to the
use or services of by payment especially of money.” Apple argued that
plaintiffs in fact received the “right to the use of” the digital content at
issue here, so its advertising was not misleading regardless of whether their
ability to access that digital content later disappeared.

But that “right to use” argument
cannot carry the water that Apple asks it to carry. The right to use something
may last but a moment or forever. And by ignoring that issue, Apple’s argument
begs the question.

Take, for example, two consumers
who each pay $19.99 to “buy” two different movies on the iTunes Store, each
planning to watch the movie the next night. The following night, the first
streams his movie purchase without a hitch. But when the second sits down on
the couch and opens the iTunes Store, she finds that the movie has disappeared
from her “purchased” folder. As it turns out, Apple lost the rights to that
movie minutes before. Both consumers had the “right to the use of” their movie
purchases for the twenty-some hours between the time they purchased them and
the time they sat down to watch them. But the second would-be movie watcher
understandably might feel a little miffed if she were told that she received
exactly what she paid for.

In a footnote, the court noted that Apple’s argument would
mean that both the consumer who “rented” the movie and the one who “bought” it
would receive the “right to the use of” that digital movie. Someone who plans
to rewatch a movie might not pay the enhanced price to “buy,” and just rent
instead, if they know that “buying” is no guarantee of continued access.

Thus, “reasonable consumers might have been misled when they
purchased digital content with the mistaken impression that the content could
not later be removed from their libraries.”

Apple also argued that its iTunes Store terms and conditions
alerted the plaintiffs (and other consumers) to the possibility that they might
lose access to purchased digital content and should download digital content to
prevent that possibility. The parties disputed whether Apple’s terms and
conditions were equivalent to front-of-package clarifications, which was a
factual issue. Also, it wasn’t clear that the T&C were sufficient. The
earliest applicable terms and conditions that Apple has submitted warn
consumers only that “Apple and its licensors reserve the right to change,
suspend, remove, or disable access to any iTunes products, content, or other
materials comprising a part of the iTunes service at any time without notice.” A
reasonable consumer “might read those terms and conditions and nevertheless
believe that once he or she has ‘purchased’ digital content and that content is
saved to his or her ‘purchased’ folder, Apple cannot at that point suspend or
terminate access to it, notwithstanding whether it otherwise could do so to
other material in the iTunes Store before purchase.”

Apple argued that the plaintiffs were warned to download
digital content “to ensure continued access to it”; once consumers download
content, Apple said, they can in fact continue to stream that content even if
Apple terminates its licensing agreement with another party. But the plaintiffs
argued that not all content can be downloaded and that the “right to download”
does not fully protect against the possibility that a consumer will lose access
to digital content. This couldn’t be resolved on a motion to dismiss.

Although the unjust enrichment claim could ultimately be
deemed duplicative of the other theories of recovery, the court also declined
to dismiss it at this stage.

from Blogger http://tushnet.blogspot.com/2023/03/another-digital-buy-button-case.html

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Supplement guide was plausibly an agent of supplement company; direct and secondary liability available

Posted on March 22, 2023 by rtushnet

Ariix LLC v. Usana Health Sci., Inc., 2023 WL 2574319, No.
2:22-cv-00313-JNP-DAO (D. Utah Mar. 20, 2023)

The parties compete in the supplement market using direct
marketing, so compete in both consumer supplement sales and in sales
representative recruitment. “Nutritional supplements are largely unregulated,
and there have been several recent scandals regarding supplement quality. To
empower consumers and sales representatives to make informed decisions, NutriSearch
… publishes the NutriSearch Comparative Guide to Nutritional Supplements …,
which is the leading source regarding nutritional supplement quality.” It’s
written by Lyle MacWilliam and purports to provide independent and unbiased
supplement reviews.

Ariix sued NutriSearch and MacWilliam with similar
claims to those raised here about Nutrisearch’s alleged lack of
independence from and bias towards Usana, resulting in false advertising. Ariix
alleged that Usana paid MacWilliam to give Usana’s supplements the top rating
in the Guide. As a result, “[t]he misstatements directly reduced Ariix’s
revenues by causing both consumers and professionals to select Usana over
Ariix.” The Guide, and promotions for it, contained several statements
depicting itself as an independent, unbiased source of information, e.g., “This
guide was not commissioned by any … company whose products may be represented
herein. The … findings are the sole creative effort of the author and
NutriSearch Corporation, neither of whom is associated with any manufacturer or
product represented in this guide.”

Usana has also taken advantage of these neutrality claims. “For
example, when Usana receives a new award from the Guide, it contextualizes the
award by quoting language from the Guide claiming that it provides independent
and objective evaluations. Usana’s website includes pictures of MacWilliam and
the Guide next to quotes made by MacWilliam about his confidence in the quality
of Usana’s supplements.”

However, plaintiff alleged, “Usana has directly paid
NutriSearch and MacWilliam hundreds of thousands of dollars per year in fixed
stipends, speaking fees, promotion fees, and promotion costs.” MacWilliam
allegedly concocted the Guide as a sales tool while working as a Usana sales
representative. Then he informed Usana executives that “I should not be on the
board or a representative anymore because it looks like I’m biased. I am going
to create more of a third-party appearance, but I’d like you to use me for
speaking and support me.” Usana responded, “Yes, if you give us the number-one
rating.”

Usana withdrew its support after NutriSearch awarded several
other supplement companies, alongside Usana, with a Gold Medal rating in the
Guide. This caused a sharp decline in book sales and speaking opportunities;
Usana “told him that it preferred being the only company that received the
Guide’s highest accolade.” MacWilliam asked “would it help if Usana is number
one in some way?” Usana said yes, and MacWilliam added a new “Editor’s Choice”
award to the Guide, which was solely bestowed upon Usana; the payments resumed.

The next year, plaintiff alleged,

MacWilliam informed Usana that, as
calculated by the Guide’s publicly disclosed criteria, Usana would not receive
the Guide’s top ranking. Usana reminded MacWilliam that “we pay you to make us
number one.” MacWilliam stated that he would either need to alter the Guide’s
ranking algorithm or Usana would need to reformulate its supplements. Usana and
MacWilliam then collaborated to ensure that Usana maintained the top position.

Usana allegedly benefited financially from the Guide. It
arranged the initial publishing agreement between NutriSearch, MacWilliam, and the
publisher. “As a result of arranging the initial publication agreement, Usana
receives a portion of the profits derived from the Guide’s sales.” [So it’s
literally NutriSearch’s literary agent?]

Usana incorporates the Guide into
its marketing training. Sales representatives are told to purchase the guide,
“learn it, refer to it in making sales, and … pitch the guide to end
consumers.” Usana characterizes payments to NutriSearch and MacWilliam as
marketing expenses. Usana reposts testimonial statements made by MacWilliam on
its website and social media pages, and issues press releases announcing the
awards it receives from the Guide.

Usana is also allegedly involved in editorial changes to the
Guide and “orders” MacWilliam to meet with Usana’s chief product officer every
year.

In 2013, Usana increased the
Vitamin D and Iodine content in its supplements and rebranded to focus on these
additions. The Fifth Edition of the Guide was then “rewritten from cover to
cover” to highlight “the most recent and exciting scientific findings on two
super-nutrients: Vitamin D and Iodine.” Prior to the Sixth Edition of the
Guide, Usana reprinted its supplement labels to emphasize the potency of its
products with regards to “cell signaling.” The Sixth Edition noted that the
Guide had been “completely rewritten” to account for “groundbreaking
discoveries” in cell-signaling. Usana ordered NutriSearch to add a new platinum
tier of achievement to the Sixth Edition and Usana was the only company awarded
with a platinum level rating in the Sixth Edition.

Usana has also allegedly used its relationship to harm
competitors, as when, based on information from Usana,  NutriSearch initially awarded Ariix a
three-and-a-half stars rating for a new product, later revised to five stars. “Usana
instructed NutriSearch to print a new version of the Guide displaying Ariix
Optimal’s three-and-a-half stars rating prior to Ariix’s product launch.” Ariix
also had various difficulties obtaining the Guide’s Gold Medal of Achievement;
while Usana was grandfathered in using old verification methods, NutriSearch rejected
the same type of evidence from Ariix; after Ariix invested significant
financial resources working with NutriSearch to develop new testing protocols, NutriSearch
again rejected it because it “could no longer confidently assure the consumer
that what is on the label is what is in the bottle.” “At the same time that
NutriSearch claimed that its concerns regarding testing accuracy precluded it
from awarding Ariix a Gold Medal certification, NutriSearch and MacWilliam
represented to consumers that they were confident in the Guide’s verification
abilities.”

MacWilliam declined Ariix’s offer to speak on behalf of
Ariix, saying that he no longer wanted to travel, but he continued to travel
and promote Usana. When Ariix confronted him, MacWilliam responded by admitting
that Usana would “cut [him] off the second I … [speak for Ariix.]”

This case is proceeding separately from the case against
NutriSearch because of personal jurisdiction issues.

Timeliness: Utah has a three-year statute of limitations for
fraud, and Ariix sued NutriSearch nearly five years before suing Usana with
very similar allegations. Because the Lanham Act has no limitations period, the
court used laches as the framework. To prove the affirmative defense of laches
on a motion to dismiss, the complaint must clearly establish that “there has
been an unreasonable delay in asserting the claim, and that the defendant was
materially prejudiced by the delay.” This complaint didn’t do that.

Usana’s claim of prejudice from “fading memories, lost
evidence, and the other difficulties associated with defending against stale
claims” was conclusory and there was nothing in the complaint to suggest that
Usana has lost relevant evidence. “On the contrary, the complaint alleges that
Usana was either in a principal-agent relationship with MacWilliam and
NutriSearch or that Usana conspired with them. Under these theories, Usana
would have been aware of the ongoing litigation between MacWilliam,
NutriSearch, and Ariix.”

As for economic prejudice, a defendant

must demonstrate that it continued
to invest in the allegedly challenged behavior to its own detriment, in
reliance that plaintiff would not bring a suit. But the mere fact that Ariix
alleges damages does not establish that Usana continued to invest in the Guide
or otherwise took actions in reliance on Ariix’s delay in filing suit….  Indeed, Usana vehemently denies any suggestion
that it invested in or controlled the Guide.

Failure to state a claim: Ariix argued that Usana could be
either directly liable for the Guide’s false statements or secondarily liable
under a principal-agent theory. The court agreed that the compliant
sufficiently alleged both.

Direct: Usana used MacWilliam and NutriSearch’s alleged
misrepresentations in its own marketing. Usana argued that it couldn’t be
liable for false statements made by third parties. But the cited cases all
protected retailers, including digital retailers, who sold allegedly falsely
labeled products: “[A] retailer is not liable if the retailer played no role in
making the products or in formulating or disseminating the alleged false
statements ….” This rule creates “a limited exception to liability when the
defendant is a retailer who had no knowledge or role in the third party’s
misrepresentation.” [I’ve never found this particularly convincing, and the
knowledge part is particularly unjustified, but ok.]

Usana didn’t qualify for a retailer exception. “MacWilliam
and NutriSearch’s misrepresentations directly promote Usana’s supplements and
Usana did not inadvertently display third-party products with misleading
labels.” As courts have held, quoting someone else counts for 43(a)(1)(B)
purposes: “[T]o fall within the text of the Lanham Act, a defendant does not
need to make a statement but only needs to use a statement or other form of
conduct specified in the Act.” And the facts here supported a claim of “use.”
The complaint alleged that “Usana was both aware of and encouraged MacWilliam and
NutriSearch’s misrepresentations.” [That sounds like contributory liability—I think
the liability is direct, without any agency issues, when they quoted MacWilliam
and NutriSearch; the court notes facts recited above that go both to Usana’s
encouragement and Usana’s own republications of their statements.] “Every time
Usana won a medal of achievement, it issued a press release quoting the Guide’s
statements that the Guide employed an independent and objective ranking
mechanism, despite Usana knowing and actively encouraging the contrary. Although
Usana itself did not state that the Guide was independent, Usana directly used
MacWilliam and NutriSearch’s misrepresentations to promote Usana’s supplements.”
[Knowledge is not an element of direct liability!]

Secondary liability: The complaint plausibly alleged that MacWilliam
and NutriSearch were acting as Usana’s agents in making the misrepresentations.
At common law, principals are vicariously liable for torts committed by their
agents within the scope of the agency relationship. “To establish agency, a
party must show (1) the principal manifested its intent that the agent act on
its behalf, (2) the agent’s consent to act on the principal’s behalf, and (3)
that both the principal and the agent understood that the agent is subject to
the principal’s control.”  A plaintiff does
not need to show an actual written agreement or plead specific details
regarding the terms of the agency agreement. The court rejected Usana’s
argument that there was no plausible allegation of an agreement because the
complaint does not provide “the terms of performance, when it was entered, or
other basic terms.” But the complaint did include the time and (some) terms of
the agreement, which was enough. “A principal’s manifestation of assent to an
agency relationship may be informal, implicit, and nonspecific.” Five years
after the agreement had allegedly been entered into, one of Usana’s executives
told MacWilliam that “we pay you to make us number one”; Usana receives a
portion of the profits generated from sales of the Guide; Usana encourages its
representatives to “get the Guide, learn it, refer to it in making sales, and
even pitch the Guide to end consumers”; at Usana’s annual conference,
MacWilliam is the only independent speaker who is allowed to sell his own
product; Usana displays the Guide on its social media pages and issues press
releases quoting the Guide’s claims of independent objectivity when Usana wins
an award; Usana characterizes payments to MacWilliam and NutriSearch as
marketing expenses. That was (possibly more than) sufficient.

Likewise, telling Usana executives that “I should not be on
the board or a representative of the company anymore because it looks like I’m
biased. I am going to create more of a third-party appearance, but I’d like you
to use me for speaking and support me,” manifested MacWilliam’s consent and
objective understanding that he was acting for Usana’s benefit, as did the
instances in which he allegedly tried to not be so tilted in Usana’s direction
and got financially punished for it, then got rewarded when he reversed course.

As for control, there are multiple nondispositive factors; fundamentally,
the court asks whether “both [parties] understood that [the principal] was to
be in charge of the undertaking.”  The
complaint was sufficient there too, given the allegations above, e.g., that
Usana conditioned speaking gigs and book sales on MacWilliam meeting this
requirement and had MacWilliam rewrite the Guide to focus on Usana’s marketing
priorities.

And it was plausible that the agents had actual authority to
make the misrepresentations, including that the Guide was independent and
objective.

from Blogger http://tushnet.blogspot.com/2023/03/supplement-guide-was-plausibly-agent-of.html

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“GoodBelly” and “GoodHealth” plus label plausibly communicate net digestive health benefits

Posted on March 22, 2023 by rtushnet

Andrade-Heymsfield v. Nextfoods, Inc., No. 3:21-cv-1446-BTM-MSB,
2023 WL 2576770 (S.D. Cal. Mar. 20, 2023)

Plaintiff brought the usual
California claims against a line of fruit juices — GoodBelly Probiotic
JuiceDrinks — “that expressly or implicitly convey the message that the
JuiceDrinks are healthy” with these package statements:

(1) START YOUR GOODHEALTH GAME PLAN
… Drink one 8 oz. glass of delicious GoodBelly a day for 12 days;

(2) Reboot your belly, then make
GoodBelly your daily drink to keep your GoodHealth going. Because when your
belly smiles the rest of you does too;

(3) WE DIG SCIENCE. LP299V is
naturally occurring in the human gut. It has been studied more than 2 decades
and has numerous research trials to show that it may help promote healthy
digestion and overall wellness; and

(4) GoodBelly Probiotics is a
delicious blend of fruit juices and a daily dose of probiotic cultures created
to naturally renew your digestive health, right where your overall health gets
started – in your belly.

Plaintiff alleged that, in fact, JuiceDrinks are unhealthy for
digestive health because they contain “excessive amounts of free sugar.” The
complaint pled facts indicating that juice consumption leads to numerous
negative health consequences.

Plaintiff has plausibly alleged
that a reasonable consumer would read JuiceDrinks’ label as claiming to promote
digestive health. The product itself is called “GoodBelly,” which can be read
by the reasonable consumer as a claim that the product is good for digestive
health. The label, moreover, can be read by the reasonable consumer as claiming
that the product is good for “rebooting” digestive health and making the belly
“smile,” i.e., as improving digestive health. The label uses the conjunction “GoodHealth”
in such a way that the reasonable consumer would likely view the label as
claiming to promote good health.

Although the label could be read as claiming only that
probiotics are good, “Defendant is selling a juice beverage, and the label may
be read by the reasonable consumer as promoting the health benefits of the
beverage, not merely one ingredient in it.” Thus, it was plausible that consumers
would read “GoodBelly” and “GoodHealth” as claims that the drinks are good for
digestive and overall health.

Disclosing the sugar content in the nutrition label was not
sufficient. That wouldn’t suffice to cure the message of good digestive and
overall health as a matter of law.

Although statements (1) and (2) alone would be puffery, “when
read together and in context, the Court cannot determine that the reasonable
consumer would not rely on the label as promoting good digestive and overall
health.”

from Blogger http://tushnet.blogspot.com/2023/03/goodbelly-and-goodhealth-plus-label.html

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