Stay ADvised: What's New This Week, March 14
In This Issue:
- Plaintiff Has "Free Range" To Move Forward With Consumer Deception Suit v. Egg Producer
- NAD Substantiates Brand Claims of Commitments to Social Justice Causes
- DOJ, FTC, and FDA Agree: There's No Such Thing As COVID-curing Herbal Tea
- CA Court Disappoints Putative Class Action Claiming Emergen-C Fibbed About Serving Size
Plaintiff Has "Free Range" To Move Forward With Consumer Deception Suit v. Egg Producer
Continuing the trend of sustainability and social responsibility suits (including those involving humane treatment of animals), a lawsuit accusing an egg producer of misleading consumers about its hens' quality of life will continue unfettered. A New York federal judge refused to dismiss the matter after finding that the reasonable consumer could interpret the company's representations in the same way plaintiff alleges she did.
Plaintiff Constance Mogull alleged that Pete and Gerry's Organics falsely markets its Nelly's Free Range Eggs. She alleged that Pete and Gerry's not only labels its eggs "free-range" and its hens "outdoor-forage," but its packaging and website imagery reinforce the boast about hen living conditions—conveying the message that the hens that lay the eggs it sells are able to roam freely.
From pictures on the label featuring children hugging a hen in grass and sunshine, to representations on a YouTube video that compare "cage-free" unfavorably with Nellie's Free Range Eggs, plaintiff avers that "these representations led Plaintiff and other reasonable consumers to understand that Defendant's hens had space to move around indoors and outdoors."
In fact, alleges plaintiff, Pete and Gerry's hens are "crammed" in crowded conditions of up to 20,000 hens at a time, most of them are not able to access the outdoor space, and when they do it is for very limited periods of time. In response, Pete and Gerry's argued that plaintiff's claims should be dismissed because its representations are true in context, not misleading, and—
at worst—non-actionable puffery.
The court was of a different opinion, finding that Mogull properly alleged that the egg sellers made materially misleading statements. Not only did plaintiff allege that the condition of the hens was contrary to her and other consumers' understanding of "free-range," but the USDA and FDA definition of the term (which includes the proviso that "free-range" hens must have "continuous access to the outdoors during their laying cycle") skews closer to Mogull's understanding.
Neither did the court buy Pete and Gerry's arguments that the challenged claims are true because they meet the "Certified Humane Free-Range" certification whose seal is displayed on the packaging. That's because the phrase appears only once on the package next to the phrase "free-range." Further, on the company's website the seal appears independently from the phrase "free-range." "[I]t is plausible that a reasonable consumer would not understand 'free-range eggs' to convey that Nellie's eggs meet the "Certified Humane" standard, concluded the court.
On the "mere puffery" argument, the court also sided with plaintiff, finding that it is "an affirmative claim about a product's qualities" and not an exaggeration expressed in vague language. A reasonable consumer could therefore rely on these representations, said the court.
The FTC has long cautioned that seals or certifications used in advertising must be independent, relevant to the attributes and claims for which they are used, and require adherence to appropriate standards. Those cautions matter to courts as well.
NAD Substantiates Brand Claims of Commitments to Social Justice Causes
In the wake of increasing consumer engagement with brands that align with social responsibility values, some companies have responded by advertising their commitment to social causes. Concerned that these claims may not be entirely accurate, the National Advertising Division (NAD) recently challenged the separate marketing of two companies that promoted their donation of money to Black, LGBTQ, and social responsibility causes, to find out if consumers can trust these claims.
Specifically, NAD challenged claims made by food delivery company DoorDash and gaming company Niantic Labs. Both companies pledged donations to social justice causes on their websites.
Niantic represented that it would be donating a minimum of $5 million in proceeds from Pokémon GO Fest 2020 tickets to "fund new projects from Black gaming" and give to "US nonprofit organizations that are helping local communities rebuild." Niantic also pledged to donate to the Marsha P. Johnson Institute, which "protects and defends the human rights of Black transgender people," and to Gameheads, "a nonprofit that teaches kids how to develop games from beginning to end."
DoorDash claimed it would be "donating $1 million, with $500,000 going to Black Lives Matter and $500,000 to create a fund to be directed by the Black@Doordash" employees to state and local organizations.
These claims, said NAD, constitute advertising because they were provided to persuade consumers who care about social justice to choose the product or service over a competitor's. "In the wake of the murder of George Floyd many companies publicly pledged to make donations to social justice charities," said NAD. Companies responded by communicating their commitment to social justice causes, it added.
Taking this into account, NAD's public interest mission in ensuring that advertising is truthful "extends to companies' representations committing to support social justice initiatives," it said. It also has jurisdiction to review any "national advertising"—paid (or non-paid) commercial messages meant to induce consumers to make a purchase that are disseminated nationally.
Here, NAD found the claims substantiated because Niantic and DoorDash provided detailed documentation backing up their claims. Niantic provided documentation showing it exceeded its pledges, and DoorDash also provided documentation corroborating its donation claims. There are likely more of these cases on the horizon.
NAD has now issued several cases making clear that when companies advertise their goals and values, aspirations aren't good enough, they must take demonstrable steps to achieve those goals—particularly with respect to environmental and sustainability claims. This new duo of cases adds to related NAD jurisprudence. Companies need to put their actions and their dollars where they say they will.
DOJ, FTC, and FDA Agree: There's No Such Thing As COVID-curing Herbal Tea
COVID-fighting tea? Say it isn't so! In a triple-threat effort, the Federal Trade Commission (FTC), Department of Justice (DOJ) and Food and Drug Administration (FDA) are pursuing a case against a company that repeatedly, blatantly, and falsely claimed its tea could cure COVID-19—and in 48 hours or less—or so the government alleges.
According to the complaint, B4B Corp. and its owner Andrew Marin Sinclair have been selling Earth Tea Extra Strength for $60 per 16-ounce bottle. Since at least April 2020, the company has claimed that the herbal concoction can prevent and treat the coronavirus, despite lacking any competent and scientific basis for these claims.
Earth Tea made numerous claims on its website and on multiple social media accounts that its product prevents or treats COVID-19. The company promised that the tea would work "in minutes to get u feeling normal within 24HRS" and that it was a "proven" treatment for COVID-19, for example.
The company also claimed that its tea was more effective than vaccines at preventing hospitalization, and that "no one who was positive and used Earth Tea went to the hospital." It also made direct comparisons between the vaccine and a bottle of Earth Tea.
These "baseless claims of health benefits" harm consumers and "are material because … they are the primary reason that anyone would pay $60 to purchase a bottle of Earth Tea," according to the complaint. The government notes that consumers might also be harmed by taking the tea in lieu of other measures that are actually protective against COVID-19, such as getting vaccinated, masking, and social distancing.
Earth Tea featured a supposed scientific study on its website backing up its outlandish claims. But, says the FTC, this study conducted in India involved 15 people and only "compounds" the misrepresentations. The study makes its allegedly deceptive claims without any documentation or supporting data analysis. Its small sample size, lack of control group, and lack of publication in a recognized scientific journal do not render the study "competent and reliable scientific evidence to support health claims," says the FTC.
The complaint wasn't the first that defendants heard of these allegations. The FTC and FDA sent a warning letter to the company and its owner in 2021. Defendants apparently removed the deceptive statements from the site, only to put them up again a few months later.
The complaint alleges that Earth Tea's deceptive advertising and misrepresentations violate the FTC Act, and that the beverage is an unapproved new drug sold in violation of the FDCA Act. The government is also pursuing charges under the COVID-19 Consumer Protection Act, which would allow it to seek monetary penalties of up to $46,517 per violation.
What is it about tea that inspires deception? Just last week the FTC announced it is paying back consumers who fell for Teami's deceptive marketing. Earth Tea has gone much further with its marketing of false corona-cures. It is hard to imagine what's next.
CA Court Disappoints Putative Class Action Claiming Emergen-C Fibbed About Serving Size
A California federal court significantly curtailed a class action lawsuit alleging that Emergen-C misled consumers about the serving size of its gummy vitamins, souring the named plaintiff's attempt at a nationwide class.
Plaintiff Jeffrey Cimoli alleged that Alacer Corp., maker of Emergen-C, deceived consumers about the content of its Emergen-C brand vitamin gummies, claiming that when he purchased the gummy vitamins he relied on the front-label representation that touted the product contains "750 mg Vitamin C" and "45 Gummies." The way Cimoli read these representations, and the way he alleged that a reasonable consumer would also read them, each Emergen-C bottle contained 45 gummies, and each gummy provides 750 mg Vitamin C. In fact, alleged plaintiff, it took consuming three gummies to reach the advertised 750 mg Vitamin C content.
Cimoli brought claims on behalf of California consumers based on the state's unfair competition law, as well as on behalf of a nationwide class based on his allegations that Emergen-C's advertising violated Pennsylvania's unfair competition law.
Alacer brought a motion to partially dismiss and partially strike class claims, seeking to dismiss the nationwide class under Pennsylvania law. The question before the court: Could plaintiff bring claims under both California and Pennsylvania unfair competition statutes and, if not, which state's law would apply?
The court held that Cimoli could not bring consumer fraud claims under two different states' consumer protection laws. "Choice of law requires determining the single state's substantive law that applies to a particular plaintiff's claims," so plaintiff could not simultaneously bring claims under both California and Pennsylvania's unfair competition statutes. Cimoli did not dispute that there were differences between the state laws, but claimed they weren't material. The court disagreed: "Courts have consistently found similar differences in state laws to be material."
As to which state's law applied under the choice of law analysis, the court reasoned that California law should apply because the alleged transactions—Cimoli's purchase of the gummies—took place in California and because Cimoli is a California resident. As a result, should the court apply Pennsylvania law, California's interest in the case would be impaired.
Reasoning that the nationwide class claims were predicated on the Pennsylvania allegations, the court dismissed the putative class claims from 49 states. Now just the California class remains.
Smart thinking about what's in the law, not just what's in a gummy, made a difference for the defense here—a point worth remembering.