Class Actions: Telephone Consumer Protection Act and Deceptive Advertising

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© 2015 Armstrong Teasdale LLP

Class Actions:

Telephone Consumer Protection

Act and Deceptive Advertising

Paul Croker

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2015 Litigation Trends Annual Survey

Respondents reported that the most important issues

impacting their companies were increasing number of class action lawsuits and a more litigious business environment.

Class action lawsuits were listed as the top litigation issue by

respondents in the US, Canada and Australia.

A quarter of all respondents reported at least one class or group action against their companies in the preceding 12 months, with survey participants from the US comprising 80 percent of that number.

71 percent of those who reported a class action had more than one filed against their companies in the previous 12 months.

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Class Actions

Class actions are a form of representative litigation. One or more class representatives litigate on behalf of many absent class

members, and those class members are bound by the outcome of the representative's litigation.

Federal Rule 23(a) identifies the four required characteristics of a class action:

1) Numerosity - a class of a size such that joinder of each member as an individual litigant is impracticable;

2) Commonality - questions of law or fact common to the class;

3) Typicality - a class representative whose claims or defenses are typical of those of the class; and

4) Adequacy of Representation – a class representative who will

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Class Actions

Rule 23(b) - A class action may be maintained if Rule 23(a) is satisfied and if one of the following are met:

1) prosecuting separate actions by or against individual class members would create a risk of:

A. Inconsistent or varying adjudications; or

B. Adjudications as to individual class members would be dispositive of or

substantially impair the ability of other individuals to protect their interests.

2) the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or

corresponding declaratory relief is appropriate respecting the class as a whole; OR

3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual

members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.

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© 2015 Armstrong Teasdale LLP

Telephone Consumer Protection Act

The Telephone Consumer Protection Act (TCPA) was enacted in 1991 as a consumer protection statute aimed at curbing abusive telemarketing practices.

The TCPA allows a consumer to sue companies for statutory

damages of $500, up to $1,500 if the violation was knowing or willful, for each prerecorded call/text, autodialed call/text, and unsolicited fax the consumer did not consent to receive.

• Do-Not-Call Registry - The TCPA also imposes the same statutory damages for telemarketing calls to consumers who have placed their residential telephone numbers on the National Do-Not-Call Registry even if the call is initiated without the use of an autodialer or prerecorded message.

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The Exponential Growth of TCPA Class Actions

TCPA litigation has grown exponentially over the past several years— 560% between 2010 and 2014.

TCPA cases are the second most filed type of case in federal courts nationwide.

Defendants in TCPA lawsuits are no longer just bad-actor telemarketers.

The top 4 TCPA class action settlements in 2014 topped $175,000,000.

The rate of TCPA litigation is only likely to increase as a result of the recent controversial declaratory ruling by the FCC.

Approximately 90% to 95% of cases are structured as national class actions.

1% of the plaintiff’s firms that are active in TCPA litigation accounted for over 50% of all complaints.

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Regulatory Agency

Congress authorized the Federal Communication Commission (FCC) to implement rules and regulations enforcing the TCPA. 47 USC 227(b), (c) and See 47 CFR 64.1200.

The FCC revises or amends its rules and also issues Rulings and Orders providing guidance on its rules.

• FCC Rulings are entitled to some deference, however, the Agency’s rulings are not binding on courts. Dish Network, LLC v. FCC, 552 F. App’x 1, 1-2 (D.C. Cir. 2014).

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Calls/Texts to Consumers Cellular Phones

TCPA applies to calls/texts to consumers’ cellular phones when a company uses an “automatic telephone dialing system” (ATDS or autodialer) or a prerecorded or artificial voice in making the call/text.

• The TCPA defines an “autodialer” broadly as any technology with the capacity to dial random or sequential numbers equipment.

These restrictions apply to not only telemarketing calls/texts, but also to all other types of non-emergency calls/texts, including informational calls/texts.

Companies must have the proper level of prior express consent to make calls/texts to cellular phones lawfully.

• Prior express written consent is required for calls or texts that are made for a marketing or sales purpose. 47 CFR 64.1200(a)(2).

• Prior oral or written consent is required for non-telemarketing calls or text messages. 47 CFR 64.1200(a)(1)(iii).

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Calls to Residential Telephones

Telemarketing calls to residential telephone numbers using a prerecorded or artificial voice can be made if the company has obtained the consumer’s prior express written consent. 47 CFR 64.1200(a)(3).

• Recently, in October 2013, the FCC increased the level of consent required for telemarketing calls from “prior express consent” to “prior express written consent”.

The TCPA does not prohibit the use of autodialers to call residential telephone numbers.

However, the TCPA precludes any calls to residential telephone numbers that are listed on the Do-Not-Call Registry.

The FCC eliminated the “established business relationship”

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Opting Out of Telemarketing Messages

Prerecorded Telemarketing Message – Cell Phone or Residential Landline

The TCPA requires that every prerecorded telemarketing message, whether delivered to a cell phone or a residential landline, provide an automated, interactive voice- and/or key press-activated opt-out mechanism that lets the

consumer make a do-not-call request prior to terminating the call, including brief instructions on how to do so.

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What Qualifies as Willful or Knowing Violation?

Courts have discretion to award treble damages (up to $1,500) for willful or knowing violations.

Some courts have held that a plaintiff established a willful or knowing violation by showing that the defendant intended to engage in the conduct at issue without requiring a showing that the defendant knew the conduct violated the TCPA or that the defendant acted recklessly.

American Home Servs., Inc. v. A Fast Sign Co., Inc., 747 S.E.2d 205, 208-209 (Ga. App. 2013). (“AHS admitted that it hired Sunbelt to send advertising faxes on its behalf. This is sufficient to make the violation ‘willful’ within the meaning of the statute.”).

Other courts have required a heightened showing that the defendant willfully and knowingly intended to violate the TCPA.

Brown v. Enter. Recovery Sys., Inc., 2013 Tex. App. LEXIS 10658, *35 (Tex. App. Aug. 22, 2013) (“But to recover treble damages, the Browns had to show that ERS knew of the TCPA's requirements and that it knew or known that its

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Private Cause of Action

A private person may seek the following forms of relief under the TCPA:

Actual monetary loss or $500 in statutory damages for each violation, whichever is greater

• Up to three times the actual monetary loss or $1,500 in

damages for each knowing or willful violation, whichever is greater.

• Injunctive relief.

• Attorneys’ fees and costs are not recoverable in a TCPA claim brought by an individual, however, attorneys’ fees

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Potential for Enormous Liability

A high volume of non-compliant calls/texts to consumers can quickly lead to staggering potential liability -- $500 to $1,500 per violation.

Recent, notable settlements of TCPA lawsuits include:

• Capital One for $75 million; • HSBC for nearly $40 million; • AT&T Mobility for $45 million;

Bank of America for $32 million; and • Papa John’s $16.5 million.

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Enforcement of TCPA by Regulatory Agencies

The FCC may take administrative action including imposing civil forfeiture penalties. 47 U.S.C 227(e)(5).

State attorneys general or other state agencies, are authorized to bring a civil lawsuit in federal court for

injunctive relief and damages in the amount of $500 for each violation, which may be trebled for willful or knowing

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Highlights from the FCC’s Recent Order

On June 18, 2015 the FCC released the text of its long awaited Ruling and Order addressing a total of 21 petitions regarding the TCPA, principally in connection with automated calls and text messages.

1. Definition of Autodialer;

2. “Make” or “Initiate” a Call or Text Message; 3. Establishing and Revoking Consent;

4. Reassigned Telephone Numbers;

5. Immediate One-Time Text Messages; and

6. Exception for Certain Free “Pro Consumer” Financial

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What Technology Constitutes an Autodialer?

The TCPA defines an “autodialer” as equipment “which has the capacity . . . to store or produce telephone numbers to be called, using a random or sequential number

generator” and “to dial such numbers.”

Although several courts have held that such equipment must have the “present” capacity to store, produce, and dial such numbers to meet the TCPA’s definition, the FCC’s Order provides that “the capacity of an autodialer is not limited to its current configuration but also includes its potential functionalities.”

The Order acknowledges that there are “outer limits” to this interpretation of

“capacity,” and that “the outer contours of the definition of ‘autodialer’ do not extend to every piece of malleable and modifiable dialing equipment that conceivably could be considered to have some capacity,” but the Order provides little guidance along these lines.

Internet-to-Phone Technology - The FCC addressed the status of Internet-to-phone text messaging, which allows a party to send an email to an address that combines a

recipient’s mobile telephone number with the provider’s domain name (e.g.,

5551212@domain.com) and results in the delivery of the e-mailed message as a text message to the recipient’s mobile telephone. The FCC’s Order states that this type of technology (as specifically described in the submitted petition) qualifies as an

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Who Makes or Initiates a Call/Text for Purposes

of the TCPA?

The prohibition on certain uses of an autodialer only applies to a person or entity that “makes” or “initiates” a call or text message.

The FCC’s Order provides a test regarding the totality of the facts and circumstances surrounding the placing of a

particular call to determine:

1) who took the steps necessary to physically place the call;

and

2) whether another person or entity was so involved in

placing the call as to be deemed to have initiated it, considering the goals and purposes of the TCPA.

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Establishing Consent

The TCPA’s express written consent requirements may be met by entering into an agreement in

writing with the consumer that includes all of the following:

• The signature of the person called. Electronic or digital signatures are permissible if valid under the federal E-SIGN Act or state contract law.

• Clear authorization for the company to deliver (or cause to be delivered) to the person telemarketing messages using an ATDS or artificial or prerecorded voice.

• The phone number to which the signatory authorizes the advertisements or telemarketing messages to be delivered.

• A statement that the person is not required to give consent as a condition of purchasing any property, goods or services.

The FCC’s Order confirms earlier guidance that “persons who knowingly release their phone

numbers have in effect given their invitation or permission to be called at the number which they have given, absent instructions to the contrary.”

The Order also confirms “that porting a telephone number from wireline service to wireless service

does not revoke prior express consent,” though the FCC cautions that the earlier-obtained consent has to meet the requirements of the “prior express consent” or “prior express written consent” standard, as the case may be, in order to be relied upon today in the wireless context.

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Revoking Consent

The FCC’s Order appears to set a new standard for revoking consent, even though the FCC claims to ground its thinking in recent FCC precedent and common law principles.

The Order purports to clarify that “consumers may revoke consent through any reasonable means.” The FCC relies on a another totality of the facts and circumstances test with respect to revocation.

• The FCC stated, by way example, that consent can be revoked through “a consumer-initiated call, directly in response to a call initiated or made by a caller, or at an in-store bill payment location.”

• The Order also notes that designating an exclusive means of revocation can, “in some circumstances, materially impair” the consumer’s ability to revoke consent.

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Calling/Texting Reassigned Telephone Numbers

The FCC’s Order clarified “that the TCPA requires the consent not of the intended recipient of the call, but of the current subscriber (or non-subscriber customary user of the phone)” that actually

receives the call.

However, the FCC recognized that because callers cannot always know that a telephone number has been reassigned, liability for the first call to a reassigned number does not necessarily lead to TCPA liability.

In so finding, the FCC acknowledged that it “do[es] not presume that a single call to a reassigned number will always be sufficient for callers to gain actual knowledge of the reassignment,” but the FCC nevertheless found “that the one-call window provides a

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Immediate One-Time Text Message

The FCC explained that a one-time automated text message sent immediately after a consumer’s request for information as part of an ad campaign does not violate the TCPA.

According to the FCC, this sort of text message is not a

“telemarketing” or “advertisement” message but instead merely the “fulfillment of the consumer’s request” for information.

The FCC clarified that in order to qualify for this exception, the one-time automated text message must:

1) be requested by the consumer;

2) be sent immediately in response to a specific consumer request; and

3) contain only the information requested by the consumer with

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Exception for Certain One-Time Free

“Pro-Consumer” Financial Messages

The FCC’s Order provides limited exceptions to TCPA liability for certain free “pro-consumer” calls or text messages about time-sensitive financial issues.

These exceptions allow financial institutions to transmit via call/text free fraud and security alerts, as well as money transfer notifications, to recipients in the absence of “prior express consent,” subject to certain specified limitations.

These limitations specify that:

1) the messages may be sent only to the wireless telephone number provided by the customer of the financial institution;

2) the messages must state (at the beginning of the call for voice calls) the name and contact information of the financial institution;

3) the messages must be limited strictly to specific fraud, security and money transfer purposes and may not include any telemarketing, cross-marketing, solicitation, debt collection or advertising content;

4) the messages must be concise, generally one minute in length for voice calls and 160 characters or less for text messages;

5) no more than three messages per event over a three-day period may be sent to the owner of an affected account;

6) the messages must offer an easy means of opting out of future messages; and

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Insulation From Class Actions

Incorporate enforceable arbitration clause and class action waiver into agreements with consumers.

• With respect to the TCPA, include these provisions in agreements or terms and conditions regarding communication (Ex: telephone call, text or fax) with consumers and require vendors to include these provisions in any agreements they may enter into with consumers.

Build, implement, and audit robust compliance programs.

• Specific to the TCPA, some action items include:

Establish compliant agreements/consents and processes in order to obtain the requisite express consent; Maintain a record of consent and procedure for handling revocation of consent;

Review existing consents for compliance; and

Develop an employee training program regarding national do-not-call rules.

Institute policies and procedures regarding vendor compliance and audit rights.

• With respect to the TCPA, some action items regarding vendors that are involved in any way with the company’s calls, texts or faxes with consumers include:

Conduct due diligence prior to selecting vendors;

Address risk allocation provisions and insurance requirements in vendor contracts; and

Obtain the right to audit vendors and establish appropriate policies and procedures for monitoring vendors on an ongoing basis.

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Insulation From Class Actions

Defense Strategies/Arguments:

• Remove Lawsuit to Federal Court

• Article III Standing

U.S. Supreme Court recently granted certiorari in Spokeo, Inc. v. Robins, (No. 13-1339, 2015 WL 1879778 (Apr. 27, 2015)). The issue is whether a plaintiff has Article III standing where he/she can demonstrate statutory damages under the Fair Credit Reporting Act (FCRA) but has not suffered any actual damages.

• Establish that the class does not satisfy any one of the following elements from Rule 23(a)or one of the elements of Rule 23(b): 1) Numerosity, 2) Commonality, 3) Typicality, and 4) Adequacy of Representation.  Liability Insurance

• Coverage Issues – some insurers policies have exclusions that may apply, such as for statutory liability.

Margulis v. BCS Insurance Co., 1-14-0286 (Ill. App. Nov. 26, 2014) (TCPA class action against insurance agent not covered by professional liability insurance).

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What Can We Do For You?

Draft and audit agreements/consents with consumers regarding communications covered by the TCPA.

Draft and audit an arbitration provision and class action waiver regarding terms and conditions and agreements with consumers.

Draft or audit agreements with vendors and consumers.

Perform audits of vendors communicating with or directing communications to consumers on behalf of your company.

Draft or audit policies, procedures and training programs regarding compliance with TCPA, as well as other federal and state consumer laws and regulations.

Audit insurance policies for coverage of claims under the TCPA or other consumer protection statutes.

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Choose Your Words Wisely:

Deceptive Advertising Claims

Krystle M. Dunn, Associate

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Starting Points for Private Class Actions

Investigations or lawsuits by government regulators

• State Attorneys General

Federal Trade Commission

Settlements with government regulators

Food and Drug Administration warning letters

• Ex. Kind brand snacks

Creative/imaginative plaintiffs’ attorneys

Individual client as basis for a class

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Federal Trade Commission Act – 15 USC § 41,

et seq

.

“. . . unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful.”

“Advertising substantiation” - advertisers must have a reasonable basis for advertised claims before they are disseminated.

Applies to both express claims and implied claims a reasonable consumer might infer.

FTC remedies include civil penalties, consumer refunds, cases

and desist orders, and orders to publish corrective advertising or include specific disclosures in future ads.

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FTC’s Approach

FTC’s analysis:

• Is there a representation, omission or practice that is likely to mislead a consumer?

Was the representation, omission, or practice “material,” i.e., would it affect a consumer’s conduct or decision? • FTC examines these questions from the perspective of

consumers acting reasonably, or if targeted to a specific audience, members of that audience acting reasonably.  Reasonableness standard protects against claims by “the

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Guides Against Deceptive Pricing – 16 CFR 233

Covers “price comparisons” – advertising a reduction from the advertiser’s own former price.

The former price must be “bona fide” and “genuine.”

“Price at which the product was openly and actively offered for sale, for a reasonably substantial period of time, in the recent, regular course of business, honestly and in good faith.”

Not necessarily fictitious because no sales at former price. Guides also cover retail price comparisons (what others are

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Guide Concerning the Use of Free – 16 CFR 251.1

Covers offers like “buy 1, get 1 free”, “two for one”, and “50% off with the purchase of two.”

Conveys to consumer that (1) free item is truly free; and (2) price for purchased item is the true regular price.

True regular price is one at which the seller “open and

actively sold the product or service” in that area in the past 30 days.

If prices tend to fluctuate, regular price is lowest price at

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Anchoring in Sale Advertisements

Advertisements reference a regular price, MSRPs, etc., either to show a price reduction or to combine with additional free or discounted items.

The reference price implies the “value” of the good.

Many consumers are attracted by the hunt for great deals and discounts, luring them to shop and to make more

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No private right of

action under the FTC!

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© 2015 Armstrong Teasdale LLP

Missouri Merchandising Practices Act

Prohibits use of any deception, misrepresentation, etc., or omission of any material fact, in connection with the sale or advertisement of any merchandise.

Enforced by the Attorney General.

State regs prohibit advertising a price reduction unless:

• Reduction is from “a bona fide regular price in effect immediately prior to the advertisement.”

Reduction is “meaningful,” defined as at least 5%.

• Records confirming the validity of the comparison are kept for at least 12 months.

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Private MMPA Class Actions

Private claims are authorized under the MMPA if the

advertisement deceived the consumer and caused him to suffer “ascertainable loss of money or property.”

Punitive damages, injunctive relief, attorneys fees, and other equitable relief are also available.

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Kansas Consumer Protection Act

The KCPA contains a broad prohibition similar to the MMPA.

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Hoffman v. Macy’s

(New Jersey state court)

Bloomingdale’s store advertised “one-day special sale.”

Plaintiff purchased an espresso machine for $299, after being told that “regular price” was $625 and MSRP was $499.99.

Court affirmed dismissal for lack of “ascertainable loss.”

Plaintiff did not allege the product was defective or that he received less than what was promised.

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Hinojos v. Kohl’s Corp.

, 718 F.3d 1098 (9th Cir. 2013)

Kohl’s advertised goods on sale for percentages off the “regular price, “ e.g., luggage for 50% off $299 regular price.

District Court dismissed, finding no economic injury – Hinojos received the goods he wanted at the advertised price.

Ninth Circuit reversed, finding it sufficient that Hinojos alleged he would not have bought the goods absent the price

misrepresentations.

But those allegations can only show (1) violation of consumer statute; and (2) proximate cause.

Economic injury is a separate inquiry. If Hinojos could not buy the goods for less elsewhere, he suffered no economic injury.

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Outlet Store Claims

Some high-end retailers use outlet stores to reach consumers who regard the flagship stores as too expensive.

Lawsuits allege that the outlet stores advertised discounts off the original prices for goods.

The original prices were fictitious, and in some cases, the products were never actually sold at the flagship stores.

Michael Kors recently agreed to pay $4.9 million to settle such a class action in New York federal court.

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Avoiding Deceptive Pricing Claims

Establish the regular price as bona fide before discounting.

Offer each product at the regular price for a reasonably substantial period of time in the recent, regular course of business.

• Check state laws for better guidance.

• Missouri state regulations set vague standards patterned after the FTC Guides but then establish specific standards to avoid a rebuttable presumption of non-compliance.

• Massachusetts state regulations identify relevant factors to consider if a price is “bona fide” and specific safe harbors that establish that a price is bona fide.

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Avoiding Deceptive Pricing Claims

(cont.)

“Aggressively” cooperate with AG investigations and try to

secure the AG’s agreement on practices that will comply with FTC standards or state counterparts.

Ask regulators to keep any investigations, and the documents you produce to them, confidential and not subject to FOIA.

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Defeating Deceptive Pricing Claims

Attack the sufficiency of the allegations about defendant’s representations and plaintiff’s damages –use 8(a) and 9(b).

Attack the complaint’s non-conclusory fact allegations as failing to show actual damages.

• Legitimacy of regular price cannot change the product itself.

• Plaintiff received the products he selected at the price he expected to pay.

• Assuming plaintiff is rational, his voluntary purchasing

decision confirms he believed the products were worth the advertised price, meaning he suffered no damages.

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Defeating Deceptive Pricing Claims

(cont.)

Attack whether the alleged facts support each element

required to state a claim under each statutory subpart.

Attack plaintiff’s standing for injunctive relief by showing no threat of similar harm in the future.

Resist class certification, e.g., challenge the putative class definition as overbroad and/or indefinite.

• Class defined as “all consumers who purchased during X time period” is overbroad:

Some bought at regular price.

Some did not see the advertisement.

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Defeating Deceptive Pricing Claims

(cont.)

Prove that the price comparison was not deceptive because

the regular/former price was bona fide:

Complied with a “safe harbor” provision in the state consumer protection laws or regulations, e.g.,

Massachusetts; or

• Consistent with broad guidance language in state laws

and/or FTC Guides, e.g., openly and actively offered at that price for a reasonably substantial period of time in the

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What’s in a Label?

Important to both companies and consumers.

• Companies want to influence purchasing decisions.

Consumers want to make informed decisions about what

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Food and Drug Administration

Establishes food labeling requirements

• A food product is misbranded in violation of the FFDCA if “its labeling is false or misleading in any particular…” 12 U.S.C.301 et seq.

Label: “a display of written, printed, or graphic matter upon the immediate container of any article” 21 U.S.C. 321(k)

Labelling: “labels and other written, printed or graphic matter (1) upon any article or any of its containers or wrappers or (2) accompanying such article” 21 U.S.C. 321(m)

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Federal Trade Commission

The regulation of advertising includes food advertising.

FTC’s authority also extends to false and misleading labeling of food products.

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Others Sources of Regulation

Federal Food, Drug and Cosmetic Act

Federal Meat Inspection Act

Poultry Products Inspection Act Egg Products Inspection Act

Agricultural Marketing Act

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Private Consumer Fraud Class Actions

Typically allege violations of state consumer fraud and deceptive practices statutes like the MMPA.

These cases can turn on the presence or absence of federal regulation or direction.

• If the complaint concerns a regulated matter, e.g., “certified organic,” the claim is preempted.

• Preemption is usually not available if the complaint

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Regulated -

Brod v. Sioux Honey

(9

th

Cir. 2015)

Defendant labeled and sold its de-pollinated honey as

“honey.”

Plaintiff claimed that the labels violated California law.

Ninth Circuit affirmed dismissal because:

• Federal Food, Drug, and Cosmetic Act preempts state food labeling laws that are “not identical” to federal ones.

Under federal law, de-pollinated honey must be labeled with “common or usual name of the food,” i.e., “honey.” • California law requiring different label was preempted.

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Unregulated –

Eggnatz v. Kashi Co.

(S.D. Fla)

Plaintiffs alleged Kashi’s advertising and labeling of its products as “all natural” was misleading because the

products contained GMO ingredients and other arguably “unnatural” ingredients.

Kashi settled, agreeing to pay about $4 million and to remove “natural” claims from products containing ingredients

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Unregulated - “Handmade” Spirits

Tito’s Handmade Vodka – S.D. of California

• Motion to dismiss denied.

Held that plaintiff could argue economic injury under the

Hinojos reasoning.

• Rejected at dismissal stage Tito’s Twombly plausibility argument, i.e., that no reasonable consumer could be deceived because the manufacture of vodka necessarily requires equipment.

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Unregulated - “Handmade” Spirits

(cont.)

Maker’s Mark – N.D. of Florida

• Motion to dismiss granted.

Under Twombly, no reasonable person could believe that nationally marketed bourbon was literally made by hand or that substantial equipment was not used.

• Plaintiffs could not allege cogent facts explaining what they believe a reasonable consumer could infer from the

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Liability for Express Claims

Bulleit Bourbon – owned by Diageo

• Labels and advertisements represent that the bourbon is distilled by Bulleit Distilling Co. in Lawrenceburg, KY.

Plaintiff alleges Kirin Brewing distills Bulleit Bourbon, and that Diageo does not operate a distillery in Lawrenceburg.  Blue Moon beer – owned by MillerCoors

Blue Moon Brewing Company is a limited capacity brewery

located inside Coors Field.

• Plaintiff alleges MillerCoors actually brews Blue Moon at MillerCoors facilities.

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Liability for Implied Claims

Class action lawsuit based on the “Red Bull gives you wings” advertising campaign.

Plaintiffs alleged the advertisements implied consuming Red Bull would lead to increased performance, concentration, and reaction speed.

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Recent Claim Headlines

“FDA Says ‘Just Mayo’ Isn’t Mayo, Violates Branding Rules

• Can’t call eggless spread “mayo”

“Blue Moon Craft Beer Claims Are Deceptive, Consumers Say”

Putative class claiming brewer’s use of “craft beer” is misleading

“Best Buy, Monster Hit With False Label Suit Over HDMI Cables”

Class claims companies deceived consumers by claiming only

Monster cables work with certain HDTVs

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Avoiding False or Misleading Labeling Claims

Ensure that product labels comply with applicable regulations.

Monitor for regulatory amendments or new agency interpretations.

Analyze product labels for express and implied claims using perspective of a reasonable consumer and confirm each claim is accurate and substantiated.

Watch for potential warning letters and enforcement actions against others in your industry.

Monitor results of pending litigation involving products making claims similar to yours.

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© 2015 Armstrong Teasdale LLP

Defeating False or Misleading Labeling Claims

If available, argue state law claim is preempted because federal law regulates the subject of the claim.

Attack the claim’s plausibility under the Twombly, i.e., reasonable consumers are not likely to be deceived.

If available, attack the complaint’s non-conclusory fact allegations as failing to show actual damages.

• Representation on label could not change product’s value. • No allegations that product not worth what plaintiff paid or

that he could have purchased comparable product for less. • Not persuasive in lawsuits alleging misrepresentations

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Defeating False or Misleading Labeling Claims

(cont.)

Resist class certification:

• Class is not ascertainable if Plaintiff:

fails to exclude consumers who did not see the representation or bought for other reasons.

Offers no reliable and administratively feasible mechanism to determine whether consumers fit the class definition.

• No commonality without proof that the representation has a material and commonly-accepted meaning.

Attack the expert consumer survey or other evidence concerning the “reasonable expectation of consumers.”

Attack the damages –the difference between the product’s worth if the representation was accurate or absent, compared to the product’s worth as purchased.

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Contact Information

Paul M. Croker

pcroker@armstrongteasdale.com

816.472.3116

Krystle M. Dunn

kdunn@armstrongteasdale.com 816.472.3157

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This program has been accredited for 1.8 Missouri Continuing Legal Education Credits, 1.5 Kansas Continuing Legal Education Credits, 1.5 SHRM Credits, and 1.0 HRCI Credits.

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