Stay ADvised: What's New This Week, September 13
In This Issue:
- Class Action Alleges Hard Seltzer “Truly” Advertised “Falsely”
- Out-of-State Email Blasts Seeking NY Plaintiffs Are Definitely Solicitation, Says NYS Bar
- Certification in Coke Class Action Fizzles Out With 9th Circuit Reversal
- No Trouble Brewing for Starbucks as 2nd Circuit Filters Out False Ad Allegations
- VIP? Nah, You Know Me: TINA Warns FTC Repeat Offender TechStyles Once Again Up to No Good
Class Action Alleges Hard Seltzer "Truly" Advertised "Falsely"
In the ongoing battles between food advertisers and the plaintiffs who claim their products are falsely marketed as "natural," "healthier," and "made with real ingredients," the latest battle has commenced in the field of hard seltzer.
A recent proposed class action lawsuit alleges that the Boston Beer Company's (BB) fruit-abundant labels for its Truly Hard Seltzer brand (Truly) misled consumers into thinking the alcoholic seltzer contains real fruit, when in fact the hard seltzer's flavoring is entirely synthetic. The complaint argues that this is especially harmful to consumers given the crowded and competitive hard seltzer market driven by consumer interest in healthier products, and one that is populated with brands whose competing products actually do contain real fruit.
Using BB's "black cherry" Truly drink as an example, the complaint claims that despite its marketing which emphasizes the fruit flavor of the product—including an image of "a prominent vignette of four fresh cherries ... colored to match the natural color of cherries" plus the words "black cherry" in bold all-caps lettering—and conveys to the reasonable consumer that the products contain real fruit ingredients, BB's Truly Hard Seltzer is made sans any fruit at all. The company's deceptive marketing of Truly as a "healthier choice, clean label product" is in fact what has propelled it to the top of the market, allege plaintiffs.
"By characterizing the Product in this manner—failing to either include its characterizing ingredient (black cherry) in the formulation, or, alternatively, clearly indicating on the Product's principal display panel that it is a 'flavored' beverage, Boston Beer has falsely and misleadingly labeled its Products, deceived consumers, and violated law," allege plaintiffs.
What BB's Truly Hard Seltzer really contains instead of the promised fruit, plaintiffs claim, is a mix of what BB has called "natural flavors." The complaint argues that "natural flavors" is a common term on food labels that is broadly defined as any flavor derived from an original plant or animal source. However, plaintiffs argue that "natural flavors" can and often do include all manner of chemicals.
Further, BB's failure to label its products in accordance with Federal Food and Drug (FDA) requirements means the products are misbranded and BB's marketing thereof is false and misleading. The FDA requires that products whose "characterizing flavor" (i.e., black cherry) is derived primarily from sources other than a natural ingredient be labeled "artificially flavored." Products which do not actually contain the characterizing flavor as an ingredient should also be labeled as "flavored," as in "black-cherry flavored." BB's marketing of its Truly Hard Seltzer does neither, which deceives consumers and violates the law, or say the plaintiffs.
Plaintiffs here allege that the use of "natural flavors" on ingredients lists "has resulted in a growing distrust of natural flavors in the consuming public." Given their own premise, time will tell if they can nonetheless show that the reasonable consumer has been duped here into believing the product contains real fruit.
Out-of-State Email Blasts Seeking NY Plaintiffs Are Definitely Solicitation, Says NYS Bar
An ethics opinion issued by the New York State Bar Association's Committee on Professional Ethics has determined that emails from out-of-state attorneys seeking prospective clients for false advertising lawsuits would constitute targeted attorney advertising and—more impactfully—solicitation.
The Opinion comes after a California law firm requested guidance from the Bar regarding "email blasts" to New Yorkers seeking potential named plaintiffs for false advertising and other class action lawsuits. The Committee considered whether—aside from constituting advertising—the communication was also solicitation, which is subject to the more stringent requirements for attorney advertising per the New York Rules of Professional Conduct (the Rules).
The proposed email blasts easily met the first three of four prongs of Rule 7.3 of the Rules governing whether an activity constitutes solicitation: (i) it was an ad initiated by a law firm, (ii) its primary purpose was to procure potential clients, and (iii) a significant motive for the email was monetary gain.
As to the fourth prong of Rule 7.3—that the advertising be communication directed at a specific recipient or group of recipients—the opinion determined that the emails also satisfied that requirement because, as the comments to the rule noted, they were addressed to specific recipients, "as with letters, emails, express packages," wrote the Committee.
"The policy of subjecting solicitations to more stringent rules is the crux of the Rule," wrote the Committee. Private communications like the proposed email blast advertising were "not as easily accessible to the public or the disciplinary authorities." They necessitated stricter rules since they cannot be reviewed or monitored as easily as, say, an advertisement on television. "Without the ability to review targeted advertising, these committees could not confirm that such advertisements are not deceptive, false or misleading," noted the Committee.
As to the threshold question of whether the Bar even had jurisdiction to rule on the matter since it concerned an out-of-state attorney, the Committee found jurisdiction based on the Rules' grant of jurisdiction to the Bar over out-of-state attorneys when they, as here, solicit clients in New York.
Certification in Coke Class Action Fizzles Out With 9th Circuit Reversal
The 9th Circuit Court of Appeals has reversed certification for a class action alleging that Coca-Cola misled plaintiffs about the presence of artificial flavors in its beverages. In reversing the lower court decision, the appeals court held plaintiffs failed to allege they would be harmed by Coca-Cola's actions.
In the multi-district litigation, plaintiffs alleged that Coca-Cola falsely marketed its beverages by labeling them as free of artificial flavors and preservatives, despite containing what they said is the artificial ingredient phosphoric acid. The complaint alleged violations of Florida, Illinois, California, Massachusetts, New York, and New Jersey consumer protection laws. It accused Coca-Cola of mislabeling the beverage by excluding a required disclosure that phosphoric acid is a preservative or artificial flavor.
The district court partially certified six classes of plaintiffs in February 2020, finding that at least one plaintiff had alleged that he would buy Coca-Cola if it was properly labeled and disclosed phosphoric acid as an ingredient, and that therefore the class had standing to use.
On appeal, Coca-Cola argued that plaintiffs did not have standing to sue because they had not alleged an imminent injury. Applying Davidson v. Kimberly–Clark Corp., which plaintiffs had used to argue that they had standing, the appeals panel held that none of the plaintiffs had demonstrated "harm or imminence rising to the level alleged in Davidson," and reversed the grant of certification.
In Davidson, the plaintiff had alleged she would purchase the product at issue in that case "if it were possible," making the "injury she suffered concrete," wrote the court. Conversely, in this case, plaintiffs' allegations were merely an expression of abstract interest in labeling requirements, and that wasn't enough to show standing, reasoned the 9th Circuit.
"None of the plaintiffs in this case allege a desire to purchase Coke as advertised, that is, free from what they believe to be artificial flavors or preservatives, nor do they allege in any other fashion a concrete, imminent injury. Instead ... they have 'each stated that if Coke were properly labeled, they would consider purchasing it,'" wrote the court. Nor was it enough to allege, as one plaintiff had done, that they would "consider" purchasing Coke.
Two additional plaintiffs expressed interest in purchasing Coca-Cola if the labels were accurate, whether or not the drink contained artificial ingredients or preservatives. But the "desire for Coca-Cola to truthfully label its products, without more, is insufficient" to show injury or future injury, ruled the appeals panel.
By striking down the class certification in this case, the 9th Circuit has granted another win to a food and beverage manufacturer which in recent months have seen a spate of dismissals and reversals in mislabeling lawsuits over lack of harm and other necessary allegations. While the case was decided as a disposition and not published, it stands as the most recent of several cases signaling federal courts' growing skepticism of food mislabeling claims.
No Trouble Brewing for Starbucks as 2nd Circuit Filters Out False Ad Allegations
It's been a good month for beverage companies faced with false advertising lawsuits. The 2nd Circuit affirmed a district court's dismissal of a lawsuit alleging that Starbucks' marketing claims that it has the "Best Coffee for the Best You" and a "Taste of Inspiration" were deceptive. The circuit court agreed with the lower court that these terms were mere puffery and too vague to be actionable false advertising.
The class action complaint sought to tie these "clams" to Starbuck's cleaning and purchasing actions to show that the coffeemaker didn't offer a "premium" product. More specifically, the complaint alleged that Starbucks' use of pesticides intended only for "unoccupied structures" in its New York stores rendered its attempts to bill itself as a premium, "high-end" coffee-maker using quality ingredients false marketing. Among the misrepresentations the complaint alleged were claims that Starbucks is the "Best Coffee for the Best You," that "It's Not Just Coffee. It's Starbucks," and that it provides a "PERFECT" coffee experience.
The lower court dismissed the suit, finding that sweeping claims that products are "premium" or "the best" weren't enough to allege deceptive practices and that plaintiffs had failed to allege any materially misleading conduct. Affirming dismissal, the appeals court agreed that the claimed misrepresentations were merely non-actionable puffery. Statements that it's "Starbucks or nothing" and the "Taste of Inspiration" are not specific representations about the quality of the product but merely "vaguely assert that Starbucks coffee is better than its competitors."
Plaintiffs had also argued that even if the individual statements were not actionable, the statements taken as a whole conveyed a more specific message. The appeals court rejected this argument as well, saying that almost none of the Starbucks ads claim any details about the products.
Further, even with respect to any marketing that may not have been puffery, the reason why plaintiffs claimed Starbucks was misrepresenting its marketing—the use of pesticide—was unrelated to the products themselves, held the court. The alleged misrepresentations referred to Starbucks' sourcing of its coffee and baked goods products.
"No reasonable consumer would believe that these statements communicate anything about the use of pesticide in Starbucks stores." Rather, the reasonable consumer would understand these claims to refer to things like Starbucks' "coffee preparation methods, ethical sourcing practices, and the quality of specific ingredients," not the use of pesticide in the stores.
Starbucks' false ad claims don't stick: whether it's allegations of falsely advertising its "perfect" experience when it's using pesticides in-store, claims it puts too much ice in its drinks, claims it falsely advertises its sour gummies as natural, or allegations it misleads about the caffeine content of its large drinks, Starbucks has faced—and moved past—all of these recent allegations fairly rapidly.
VIP? Nah, You Know Me: TINA Warns FTC Repeat Offender TechStyles Once Again Up to No Good
Advertising watchdog Truth In Advertising (TINA) is working hard to get a regulatory spotlight on the marketing practices of online retailer FabKids and its parent company TechStyle. Following its own investigation, the group filed a complaint letter with the Santa Cruz District Attorney's office asserting that FabKids is advertising its VIP subscriber deals disguised as bargains that are available to all its customers.
The letter alleges that FabKids is violating the FTC Act and the Restore Online Shoppers Act (ROSCA). TINA also asserts that FabKids' actions violate the terms of a 2014 stipulated judgment with the DA's office which barred the company from making misleading statements about its products or deceptively marketing discounts only available to VIP members. TINA also filed a similar complaint letter with the FTC.
Urging both the Santa Cruz County DA and the FTC to investigate TechStyles and FabKids, TINA alleges that in more than 80 instances of advertising on television, social media, and newsletters, FabKids promotes a special deal that's only available to "VIP Members" who pay a monthly $39.95 fee but passes the deal off as the regular sale price available to all customers. TINA claims the ads either don't disclose the limited deal at all or don't disclose it clearly and conspicuously—resorting to the use of "barely legible fine print." The company also uses confusing labeling on the website that makes it difficult for consumers to tell that the terms of the shoe offer are only for VIPs, says TINA.
FabKids doesn't treat its VIP members any more conscientiously either, according to TINA. Customers who go through the process of signing up to become VIP members are also signed up for negative option offers without any clear and conspicuous disclosures alerting them about that. The site also makes it difficult for consumers to understand that they have to affirmatively skip the monthly purchase within the first five days of each month or pay a fee, says TINA.
Further, according to TINA, the terms are either provided in nearly illegible fine print on the ad, or consumers have to scroll past 1,300 words in FabKids' terms of service to find them. These details reveal that the terms vary significantly from the advertised claims that the $39.95 fee that FabKids calls a "member credit" can be used "any time, on anything," says TINA.
TINA also accuses FabKids of deliberately making it difficult for "VIP" customers to cancel their subscriptions in order to "dissuade, or even prevent, VIP members from canceling so that FabKids may continue charging consumers on a monthly basis." Finally, TINA says FabKids' social media ads are deceptive as many of the influencers advertising the kids' retail line fail to properly disclose their material relationship with the company and that the social media posts are ads.
In addition to FabKids, TechStyle Fashion Group also owns JustFab, Shoedazzle, Fabletics, and Savage X Fenty, the lingerie line designed by pop star Rihanna. Despite a great deal of press following TINA's earlier complaints about Savage X Fenty and prior accusations of wrongdoing by other TechStyle companies such as Fabletics, all centering around similar marketing tactics, so far neither the FTC nor the Santa Cruz County DA have taken up any additional investigations or enforcement actions against TechStyles. Class action lawyers have advertised for plaintiffs, and a 2011 California class action against JustFab resulted in a payout of almost $2 million to consumers who had allegedly fallen prey to misleading advertising. Time will tell what happens next!