The Advertising Disputes & Litigation and Consumer Protection Committees’
RECENT LITIGATION DEVELOPMENTS
[Cases from September 30 to October 15, 2015]
Prepared for the ADL and CP Committees by Dan Blynn, Shahin Rothermel, Sam Boro, and
Laura Arredondo-Santisteban of Venable LLP; Dale Giali, Andrea Weiss, Elizabeth Crepps,
and Rebecca Johns of Mayer Brown LLP; Sherrie Schiavetti, Katie Riley, Donnelly McDowell,
Devon Winkles, Jennifer Rodden of Kelley Drye & Warren LLP; Doug Brown and Samantha
Duke of Rumberger Kirk & Caldwell; Darren McCartney of Chad A. Walters, P.A.; Lauren
Valkenaar of Davis Wright Tremaine LLP; Erik King of Lockheed Martin; Tiffany Ge of
Frost Brown Todd LLC; Mike Sherling, Judicial Law Clerk, Maryland Court of Special
Appeals; Hal Hodes and Linda Bean of the National Advertising Division (NAD) of the
Council of Better Business Bureaus; Peter Farnese of Beshada Farnese LLP; Heather
Goldman of Bryan Cave LLP; and Greg Roseboro II, Attorney at Law.
RECENT DECISIONS
Lanham Act and Other Competitor Actions
The U.S. District Court for the District of New Jersey denies in part and grants in part the plaintiff’s
motion for judgment on the pleadings to dismiss the first amended counterclaim and grants the thirdparty defendants’ motion for judgment on the pleadings to dismiss the third-party complaint,
stemming from claims filed by the defendant/third-party plaintiff (“Defendant”). Defendant’s
counterclaims and third-party complaint, which alleged that the plaintiff made false and misleading
statements that caused economic injury, asserted causes of action for (1) unfair competition in
violation of the Lanham Act; (2) false promotion in violation of the Lanham Act; and (3) tortious
interference. In denying the plaintiff’s motion to dismiss the Lanham Act counterclaims, the court
held that Defendant had sufficiently alleged that the plaintiff made literally false or misleading
statements that proximately caused an actual injury to Defendant. In granting the third-party
defendants’ motion to dismiss the third-party complaint, the court held that Defendant did not have
standing to pursue its claims against the third-party defendants because Defendant failed to allege an
injury protected by the Lanham Act. (New Jersey Physicians Utd. Reciprocal Exchange v. Boynton
& Boynton, Inc., No. 12-5610, 2015 WL 5822930 (D. N.J. Oct. 1, 2015)).
The U.S. District Court for the Northern District of Illinois grants the defendant’s motion to dismiss.
Plaintiff Right Field Rooftops alleged that defendant Chicago Cubs Baseball Club violated the
Lanham Act, the Illinois Uniform Deceptive Trade Practices Act, and antitrust law by constructing a
video board that blocked the plaintiff’s view of Wrigley Field. Plaintiff sought relief for, among
other things, false and misleading commercial representations. The court dismissed the false and
misleading commercial representations claim on grounds that the challenged statement – “It’s funny
– I always tell this story when someone brings up the rooftops. So you’re sitting in your living room
watching, say, Showtime. All right, you’re watching ‘Homeland.’ You pay for that channel, and
then you notice your neighbor looking through your window watching your television.” – was a non-
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factual personal opinion. (Right Field Rooftops, LLC v. Chicago Cubs Baseball Club, LLC, No. 15
C 551, 2015 WL 5731736 (N.D. Ill. Sept. 30, 2015)).
Consumer Class Actions
The U.S. District Court of the District of Connecticut dismisses a putative class action against
Webloyalty, Inc. arising out of a the plaintiff’s enrollment in the defendant’s automatically renewing
online savings club after the plaintiff bought a video game through defendant GameStop’s website,
which resulted in unauthorized monthly charges. The plaintiff alleged violations of the Electronic
Communications and Privacy Act (“ECPA”), the Electronic Funds Transfer Act (“EFTA”), several
Connecticut consumer protection statutes, and common law principles. The court noted that it was
the plaintiff’s burden to plead that the disclosures on the checkout page were false or misleading and
resulted in his enrollment in the purported savings club; however, the plaintiff testified in a
deposition that he did not remember the page. The court also found that the enrollment page
included adequate disclosures that, by choosing to join, the consumer would be charged a monthly
fee after a thirty-day free trial. The court dismissed the plaintiff’s fraud claims for failure to plead
with specificity under Fed. R. Civ. P. 9(b), and dismissed the ECPA and EFTA claims, noting that,
given the enrollment page’s disclosures, the plaintiff’s entry of his email address and clicking on a
“yes” button constituted authorization. (L.S. v. Webloyalty, Inc., -- F. Supp. 3d --, No. 3:10-CV01372, 2015 WL 5990857 (D. Conn. Oct. 15, 2015)).
The California Court of Appeal reverses the judgment and the award of costs to defendant Monier,
Inc. Plaintiff filed a putative class action, alleging that Monier violated California’s Consumer Legal
Remedies Act (“CLRA”), Unfair Competition Law (“UCL), and False Advertising Law (“FAL”), by
representing that its slurry-coated concrete roof tiles would last 50 years, would have a permanent
color, and would be maintenance-free, when, in fact, it knew, but failed to disclose, that the color
composition of its roof tiles would erode away well before the end of the represented 50-year
lifespan. On appeal, the plaintiff argued that, following a 31-day trial, Monier's motions for nonsuit
and for judgment were erroneously granted. The appellate court agreed, holding that, while the trial
court did not abuse its discretion in excluding the testimony of the plaintiff’s expert concerning class
size, the trial court erroneously found that the expert provided the plaintiff's only evidence on class
liability and damages as well. In short, the trial court erroneously conflated the plaintiff's evidence
on the extent of class liability (i.e., class size) with the fact of class liability. The jury, as the fact
finder on the CLRA claim and pursuant to special interrogatories in its verdict form, found that the
plaintiff had established the fact of class liability and the fact of class damages through other
evidence that was unchallenged on appeal, and which the trial court effectively accepted as the fact
finder on the court-tried UCL claim. Accordingly, the appellate court directed the trial court to enter
judgment of class liability and damages for the plaintiff on the CLRA claim based on the jury’s
findings of class liability and class damages. The Court of Appeal remanded the matter to the trial
court to determine class size and individual eligibility for recovery through any methods that are
appropriate, including representative statistical sampling or witness testimony or survey, a claims
process, individualized mini-hearings, or some other appropriate technique. (McAdams v. Monier,
Inc., 2015 WL 5968461 (Cal. App. Oct. 14, 2015)).
The U.S. District Court for the Southern District of California grants the plaintiff’s request to modify
the class definition and denies defendant Wyeth, Inc.’s request to decertify the class in a case
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alleging false advertising in violation of California’s Consumer Legal Remedies Act and Unfair
Competition Law. Defendant argued that the class should be decertified because it is not
ascertainable and common issues of fact or law do not predominate. The court denied the
defendant’s request to decertify the class, finding that the class definition described a set of common
characteristics sufficient to allow an individual to determine whether she is a class member with a
potential right to recover. The court noted that proposed classes can be ascertainable even when the
class membership must be identified through affidavits, and held that the defendant failed to show
that its inability to confirm class member identities barred certification. The court rejected the
defendant’s predominance argument and found that it was appropriate to remove the requirement
that class members were exposed to the defendant’s representations. (Krueger v. Wyeth, Inc., No.
03cv2496, 2015 WL 5839197 (S.D. Cal. Oct. 7, 2015)).
The U.S. District Court for the Northern District of Illinois denies a third party’s motion to intervene
and have his counsel appointed as interim lead counsel in a class action against a manufacturer of
glucosamine supplements. In the underlying case (the “Pearson” case), the plaintiffs alleged that the
defendants improperly labeled its glucosamine supplement products and made unsubstantiated
claims that the products could “rebuild cartilage” and “lubricate joints.” In the intervener’s case (the
“Nunez” case), the plaintiffs alleged that the same defendants made false and misleading statements
when marketing and selling its product, “Flex-a-min.” Plaintiffs in the Nunez case sought to
intervene in the Pearson case after learning that the Pearson defendants had reached a settlement
that “unilaterally settled Nunez’s class claims.” The court denied the motion to intervene, finding
the motion untimely because the Nunez plaintiffs had been made aware of the settlement discussions
several months before the final settlement and did not object or seek to intervene at that time. In
addition, the court held that nothing in the settlement barred Nunez’s individual claim, as he could
opt-out of the settlement and pursue his individual claim or object to the settlement at the final
approval hearing. (Pearson v. NBTY, No. 11 C 7972, 2015 WL 5781517 (N.D. Ill. Oct. 1, 2015)).
The U.S. District Court for the District of New Jersey grants the plaintiffs’ motion for leave to file an
amended complaint in a false advertising multidistrict litigation comprised of putative class actions
alleging consumer fraud act violations, unjust enrichment, and breach of express warranty with
respect to 30 disputed L’Oreal products. The plaintiffs sought to add claims for breach of contract
claim and RICO violations against L’Oreal USA, and add a new defendant, L’Oreal S.A. (“L’Oreal
France”). Although the deadline to amend pleadings had passed, the court analyzed the plaintiffs’
motion under Fed. R. Civ. P. 15 rather than pursuant to Rule 16(b), which requires “good cause,”
because it found the deadline had been “inoperative for quite some time” given that the scheduling
order had been repeatedly extended “with the involvement and consent of both parties.” Applying
the Rule 15 analysis, the court found that (1) L’Oreal USA would not suffer prejudice because the
amendment will not require it to expend significant additional resources; (2) the amendment will not
cause undue delay because the case is a long way from over, so the plaintiffs’ motion is relatively
early in the case, and any delay will not prejudice L’Oreal USA; (3) the amendment is not clearly
futile, a finding the court made without engaging in a full-blown Rule 12(b)(6) analysis because it
found that type of analysis was in excess of the inquiry appropriate for plaintiffs’ motion for leave to
amend. (In re L’Oreal Wrinkle Cream Mktg. Practices Litig., MDL No. 2415, 2015 WL 5770202
(D.N.J. Sept. 30, 2015)).
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The U.S. District Court for the Southern District of New York denies the plaintiffs’ motion for class
certification in a putative class action against defendant Avon, a seller of cosmetics designed to
reduce the effects of aging. Plaintiffs alleged, among other things, violation of California’s unfair
competition and consumer protection acts based on Avon’s purported false or misleading claims
about the products’ anti-aging properties, and sought certification on behalf of consumers who
bought the products through Avon’s independent sales representatives (“ISRs”). The plaintiffs
argued that predominance existed based on claims made in brochures that the products biologically
and chemically reverse and repair wrinkles. The court denied certification, holding that the plaintiffs
failed to prove that the statements in the brochures were amenable to generalized proof, particularly
because Avon introduced new brochures every two weeks, many of which did not contain the
challenged claims. Further, the court held that the plaintiffs failed to show that the brochures were
regularly given to customers who purchased Avon products through ISRs. The court held that the
misrepresentation at issue was not made to all customers through a uniform product label and instead
involved material variation both in the representations made and the degrees of reliance by
individual consumers. As such, the class was not ascertainable because identifying the class
members would require a mini-hearing on the merits of each case. The court also refused the
plaintiffs’ proposal to identify class and subclass members by providing claim forms and receipt;
providing a claim form and UPC code from the product packaging; or providing a claim form and
sworn affidavit that included objective indicia of reliability, such as the date of purchase and the ISR
from whom the purchase was made. (In re Avon Anti-Aging Skin Care Creams and Prods. Mktg.
and Sales Practices Litig., No. 13-cv-150, 2015 WL 5730022 (S.D.N.Y. Sept. 30, 2015)).
The U.S. District Court for the Northern District of California grants defendant Whole Food
Market’s motion to dismiss most of a second amended consumer class action complaint. Plaintiff
sued on behalf of himself and a nationwide consumer class under California consumer protection
laws, alleging that the defendant’s food products contained a disguised form of added sugar under
the ingredient name “evaporated cane juice” (“ECJ”) and were falsely represented as natural.
Plaintiffs argued that violation of federal and state labeling law sufficed to state a strict liability
claim, regardless of whether the plaintiff was deceived by or relied on the mislabeling, and that the
labeling was false or deceptive. The court rejected the plaintiff’s strict liability theory because a
plaintiff must plead actual reliance under each prong of the UCL, including the unlawful prong,
when the underlying theory sounds in deception. Noting that the plaintiff was a health-conscious
consumer and would have been aware that ECJ was a form of sugar, the court rejected on
plausibility grounds plaintiff’s allegations that mislabeling about ECJ was deceptive. (Pratt v.
Whole Food Market California, Inc., No. 5:12-cv-5652, 2015 WL 5770799 (N.D. Cal. Sept. 30,
2015)).
Federal Trade Commission (FTC) Litigation Decisions
The U.S. Court of Appeals for the Ninth Circuit affirms in part, and vacates and remands in part, the
district court’s order holding the defendants, individual owners of Ivy Capital, Inc., liable for
deceptive telemarketing actions. The FTC’s ten-count complaint alleged violations of the FTC Act
and the Telemarketing Sales Rule, which prohibits deceptive telemarketing acts or practices. The
district court held that the defendants had violated these provisions through their false and
misleading advertising of the company’s business counselling services, and through exaggerated
claims about the income consumers could make using the counselling service. The FTC brought suit
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against the defendants, a husband and wife, on the theory that the defendants had authority to control
the company’s deceptive acts. Based on the defendants’ involvement in the telemarketing
businesses and their engagement with and control of the various entities involved in the
telemarketing scheme, the court found them personally liable for the deceptive telemarketing. The
husband participated in manager meetings, had the authority to sign contracts on behalf of the
enterprise, was a signatory for multiple accounts, provided consulting services and crucial start-up
resources, and assisted in setting up a foreign call center, leading to a finding that he had “authority
to control” the deceptive acts. Moreover, evidence showed that he was aware of customer
complaints, the high price charged for the company’s consulting services, and high chargeback rates
that indicated fraud. The wife was a majority owner and manager of the company’s primary
operations and used funds from the company to pay for her own personal expenses, which
established her as the alter ego. Thus, the court held that adherence to the corporate fiction would
promote injustice. The Ninth Circuit, however, vacated the district court’s disgorgement order
against the wife because, as the alter ego, she is jointly and severally liable for the disgorgement
order, and an individual order would result in impermissible double recovery. (FTC v. Ivy Capital,
Inc., -- Fed. Appx. --, No. 13-16052, 2015 WL 5781664 (9th Cir. Oct. 5, 2015)).
Attorney General Litigation Decisions
The U.S. District Court for the Middle District of Florida enters default and final judgment in the
State of Florida’s and State of Connecticut’s suit against defendants Litigation Law LLC, The
Resolution Law Group, P.C., The Resolution Law Center, LLC, Onisak, LLC, and Remarque
Holdings, LLC, arising out of a deceptive mortgage relief scheme that resulted in violations of
Regulation O, the Florida Deceptive and Unfair Trade Practices Act (“FDUTPA”), Florida’s Civil
Theft law, and the Connecticut Unfair Trade Practices Act (“CUTPA”). Defendants failed to file
answers or otherwise defend the claims, and were deemed to have admitted the well-pled facts of the
complaint. The court found that, based on the facts alleged, the defendants violated Regulation O by
purporting to assist consumers in obtaining loan modifications on their home mortgages and helping
to prevent home foreclosures. The complaint alleged that the defendants charged upfront fees before
the consumers had executed written agreements with the loan holders that incorporated the offer
obtained by the defendants; discouraged consumers from communicating directly with their lenders
or servicers; and made misrepresentations to consumers about material aspects of the purported
mortgage assistance services by failing to disclose the harm that could result if consumers stopped
paying their mortgage. Additionally, disclosures were not clearly presented, and were not preceded
by the heading “IMPORTANT NOTICE” or written in the required font size required by Regulation
O. The court found that these allegations also stated violations of FDUTPA and CUTPA and
entered an order for $1,914,669 in restitution and $3,875,000 in civil money penalties, permanently
enjoined defendants from providing consumer financial products or services (including mortgage
assistance relief services), and issued fencing-in relief. (State v. Berger Law Group, P.A., No. 8:14CV-1825-T-30, 2015 WL 5922933 (M.D. Fla. Oct. 9, 2015)).
National Advertising Division (NAD) Decisions
The Scotts Company LLC, a maker of household insect and weed control products, has voluntarily
discontinued advertising claims that its competitor United Industries Corporation’s “Spectracide”
“gives you year-long control of just roaches. The label says so.” United Industries also challenged
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the use of sweepstakes as an incentive to inflate Scotts’ social media presence, arguing that it misled
consumers by encouraging others to post product reviews without disclosing that an incentive was
offered. In response to NAD’s initial inquiry, Scotts informed NAD that the commercials had been
permanently discontinued and that the company had “no plans to re-release the challenged
commercials or online ads, or use the claims therein in the same form in future advertising.” NAD
noted that the voluntarily discontinued claims will be treated, for compliance purposes, as though
NAD recommended their discontinuance and the advertiser agreed to comply. Regarding the
challenged sweepstakes promotion, Scotts noted that its official rules informed consumers that they
were required to disclose that their review was submitted as part of a “Sweepstakes entry” and when
it became aware that consumers were not including the proper disclosures, the company took several
corrective steps, including placing the disclosure requirement in its online advertisement, directing
its customer-review aggregator to apply a “Sweepstakes Entry” tag to each relevant review, and
placing a disclosure on its own website where the reviews were displayed. NAD found the
advertiser’s efforts to disclose the material connection between the endorsers and the advertiser were
sufficient and proper. (The Scotts Co., LLC (Ortho Home Defense, Ortho Bug-B-Gon, Ortho WeedB-Gon), NAD Report No. 5889 (Oct. 5, 2015)).
Claims made by Verizon Communications, Inc., for “FiOS” Internet and television service were
challenged by Comcast Cable Communications. NAD recommended that the advertiser discontinue
claims that, “In customer satisfaction studies, Verizon is Rated #1 in internet speed and reliability”
and that it is “Rated #1 in HD Picture Quality based on customer satisfaction studies.” Verizon has
said it will appeal NAD’s adverse findings to the National Advertising Review Board. NAD noted
that claims about customer satisfaction with a specific attribute – particularly an attribute that can be
objectively measured and compared – should clearly convey a message of customer satisfaction, not
a message of superior service. Further, it noted that claims about technical performance superiority
differ from claims about customer satisfaction. NAD found that a “reasonable takeaway from
Verizon’s claims that it is ‘Rated #1’ for ‘speed and reliability’ or ‘HD picture quality,’ even when
qualified by the language ‘in customer satisfaction surveys,” is that Verizon “provides faster speeds
or better HD picture quality.” NAD cautioned the advertiser that when it is using a customer
satisfaction study to support its claims, its claims should match the support provided – that its
customers are more satisfied with a particular service attribute than customers of competing
providers. (Verizon Communications, Inc. (FiOS), NAD Report No. 5886 (Sept. 25, 2015)).
RECENT FILINGS
Consumer Class Actions
Putative nationwide class, with California- and New York-only subclasses, filed against GNC
Holdings, Inc. in the U.S. District Court for the Southern District of California, alleging violations of
California’s Consumer Legal Remedies Act, Unfair Competition Law, and False Advertising Law
and New York’s Deceptive Trade Practices Act, as well as negligent misrepresentation. Plaintiffs
claim that the defendant’s “Whey Protein” product packages deceive consumers about the amount of
product because the packages contain large amounts of non-functional slack fill. (Gioia, et al. v.
GNC Holdings, Inc., No. 3:15-cv-02273 (S.D. Cal. complaint filed on Oct. 9, 2015)).
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Putative California-only class action filed against Big Heart Pet Brands and The J.M. Smucker Co.
in the U.S. District Court for the Eastern District of California, alleging violation of California’s
Unfair Competition Law and Consumer Legal Remedies Act. Plaintiff claims that the defendants
falsely advertise their “Milo’s Kitchen”-brand of grain-free dog and cat food and treats as “Made in
U.S.A.,” despite the products containing tapioca – a starch made from the cassava root, which is not
commercially grown in the United States. (Fitzpatrick v. Big Heart Pet Brands & J.M. Smucker Co.,
No. 2:15-cv-2116 (E.D. Cal. complaint filed on Oct. 9, 2015)).
Putative nationwide class, with Illinois-only subclass, filed against Wal-Mart Stores, Inc. in the U.S.
District Court for the Northern District of Illinois, alleging, among other things, violation of the
Illinois Consumer Fraud and Deceptive Business Practices Act. Plaintiff claims that the defendant
falsely advertised and labeled its “Great Value Pork & Beans in Tomato Sauce” product because
scientific testing has shown that the product does not contain any pork, despite its name and the
label’s inclusion of pork as an ingredient. (Mullins v. Wal-Mart Stores, Inc., Case No. 1:15-cv08946 (N.D. Ill. complaint filed on Oct. 8, 2015)) [A similar case was filed against Walmart in the
Central District of California, making the same allegations under California, New Jersey, and
Pennsylvania consumer protection statutes (Tye v. Wal-Mart Stores, Inc., Case No. 8:15-CV-01615
(C.D. Cal. complaint filed on Oct. 7, 2015)).]
Putative nationwide class action, filed against Dynamic Sports Nutrition, LLC in the in the U.S.
District Court for the Middle District of Florida, alleging violations of the Florida Deceptive and
Unfair Trade Practices Act. Plaintiffs allege that the defendant’s labeling for its dietary supplement
products deceived consumers by falsely advertising the products’ steroid-like characteristics. (Tiger,
et al. v. Dynamic Sports Nutrition, LLC, No. 15-cv-2375 (M.D. Fla. complaint filed on Oct. 7,
2015)).
Putative nationwide class action filed against Vivaterra International, LLC in the Court of Common
Pleas for Ohio (Cuyahoga County), alleging violations of the Ohio Consumer Sales Practices Act.
Plaintiffs assert that the defendant represent that its apparel and bedding products are made from
bamboo when the products are actually made from rayon, a bamboo derivative. (Goldkrantz, et al.
v. Vivaterra Int’l, LLC, No. 15-cv-852223 (Ohio Ct. Comm. Pleas complaint filed on Oct. 7, 2015)).
Putative nationwide class action filed against Santa Fe Natural Tobacco Co. and Reynolds
American, Inc. in the U.S. District Court for the Southern District of Florida, alleging violations of
the Florida Deceptive and Unfair Trade Practices Act, fraud, negligent misrepresentation, and unjust
enrichment. Plaintiff argues that the defendant’s claims that its “Natural American Spirit cigarettes
are “natural,” “additive free,” “unadulterated,” and “organic” falsely imply that the cigarettes are
healthier and safer than other tobacco products. (Sproule v. Santa Fe Natural Tobacco Co., No.
0:15-CV-62064 (S.D. Fla. complaint filed on Sept. 30, 2015)).
Putative Florida-only class action filed against DraftKings, Inc. transferred from the U.S. District
Court for the Southern District of Florida to the U.S. District Court for the District of Massachusetts.
Plaintiffs allege that DraftKings violate the Florida Deceptive and Unfair Trade Practices Act by
falsely advertising that new users are eligible for a “Free Offer” of a “100% First-Time Deposit
Bonus,” when in reality, users receive no money upon deposit and must deposit additional funds
before receiving only a fraction of the promised “bonus.” (Aguirre v. DraftKings, Inc., No. 1:15-cv13476 (D. Mass. complaint transferred on Sept. 30, 2015)).
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