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Stay ADvised: What's New This Week, July 13

07.15.20
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In This Issue:

Quincy Bioscience May Settle Prevagen False Ad Class Action

In case you have forgotten the many chapters that came before, this may mark the last chapter in the Prevagen false ad class action saga. After reviewing "tens of thousands of pages and documents…as well as expert discovery," the plaintiffs who brought one of multiple false ad suits accusing Prevagen maker Quincy Bioscience of lying while advertising its memory supplement submitted a proposed settlement to the court.

If approved, the settlement would end a half dozen class action suits across the United States, from Florida, New York, and New Jersey to Texas, Missouri, and California, all at various stages of litigation but centering on core allegations that Quincy deceptively marketed and sold Prevagen.

Plaintiffs who filed the proposed "global settlement agreement" alleged in their 2019 Florida complaint that Quincy misled consumers with false and misleading statements advertising the supplement. Prevagen claimed it improved age-related memory loss, and that it had been "clinically tested" to do so within "90 days." The company, as portrayed in the complaint, cynically marketed a product while knowing it was "impossible" for it to work as advertised.

Plaintiffs asserted that Quincy engaged in a concerted pattern of misrepresentations about Prevagen with knowledge that practically all its representations about Prevagen were false. In point of fact, "it is impossible for Prevagen to work as represented, and Quincy repeatedly and uniformly makes false statements to the public about Prevagen's ability (rather, non-ability) to improve memory or to otherwise affect the brain," asserted plaintiffs. Studies put forth by Prevagen were "an attempt to bolster its misrepresentations" with bogus scientific proof which was actually unpublished and conducted in-house.

The settlement will commit Quincy to pay substantial refunds of up to $70 per consumer in the class. Quincy will also pay $4.2 million in attorneys' fees and costs and various incentive awards to lead plaintiffs. Further, the company would be barred from representing that Prevagen improves memory unless the claim is accurate or includes the source of the representation. The parties acknowledged that "Quincy certainly denies all such allegations, but has agreed to globally resolve this matter, instead of continuing to litigate all of these pending putative class action matters across the country."

In return, plaintiffs in all of the pending class action suits have agreed to drop the lawsuits.

Key Takeaways

One wonders about class counsel's dedication to the cause. Even co-lead class counsel was singing Quincy's praises now that the settlement may be at hand: "Much of the credit for this great settlement certainly goes to Quincy and their counsel, who decided to help their dedicated consumers," he said in a statement. Will this help deflect the FTC? Not likely. Quincy will still have to fight the ongoing FTC suit alleging false advertising claims related to Prevagen.

Judge Dismisses Kellogg's Vanilla False Ad Class Action

For many home bakers, it is the vanilla that makes the difference between a great brownie and one that is just ok. But must it be "real?" Vanilla litigation is a hot topic these days, with a string of class action suits filed by plaintiffs alleging that companies market products as the real deal when they don't contain flavoring derived exclusively from real vanilla beans. This past month one California plaintiff lost his bid to claim that Kellogg's misrepresented the source of the vanilla flavor in its Bear Naked Granola V'nilla Almond.

Presumptive lead plaintiff Harlan Zabak claims in his complaint that Kellogg's deceptive marketing of the Bear Naked Granola V'nilla Almond led him to believe that the product was flavored only with real vanilla. Vanilla is one of the most expensive ingredients in the world, which, plaintiff alleges, provides "an incentive for food producers to use lower cost substitutes." Zabak asserted that he would not have paid a premium price for the product if he'd known it did not contain flavoring derived only from real vanilla.

Zabak asserts that a reasonable consumer would be misled about the source of the product's flavor based on the use of the word "V'nilla," the phrase "naturally flavored" on the package front immediately beneath the words "V'nilla Almond," and the depiction of a vanilla plant above the word "vanilla" on the back of the package.

Zabak pointed to the ingredient list's declaration of "natural flavors" as evidence that the product violated of California's Consumer Legal Remedies Act (CLRA), Unfair Competition Law (UCL), and False Advertising Law (FAL). He argued that declaring the ingredient as "natural flavors" rather than specifically calling out vanilla extract or vanilla flavor "is tacit acknowledgment that [] 'natural flavors' is not a synonym for the required vanilla ingredients" because "it would make no sense" to use the more expensive ingredient but not expressly list it on the package.

Kellogg's countered that Zabak's case rested on mere speculation, and the U.S. District Court for the Southern District of California agreed. It dismissed the suit with leave to amend, finding that plaintiff failed to allege that the product did not contain real vanilla. The court was not convinced by plaintiff's assertion that omission of real vanilla from the ingredient list is an implied admission that the product contains no real vanilla. Plaintiff did not allege sufficient facts to "nudge [his] claims…across the line from conceivable to plausible," wrote the court.

Key Takeaways

As is so often true in life, it is all in the phrasing. A plaintiff must do more than claim that an "omission is the admission" for a cognizable claim. It should be no surprise that to succeed, allegations must not rest solely on conjecture.

Tyson "Prime" Pork False Ad Case Dismissed

There's no "meat" to a proposed class action lawsuit seeking to pin false advertising claims on Tyson Fresh Meats and The Fresh Market regarding Tyson's promotion of its pork products as "Prime," ruled the Florida federal judge who dismissed the case.

Plaintiffs in the proposed class action suit alleged that Tyson and Fresh Market falsely advertised their "Chairman's Reserve Prime Pork," which "unfairly deceived them into believing that the pork used in the product was certified by the United States Department of Agriculture (USDA) as prime in the same way that the USDA certifies beef as prime." Plaintiffs argued that these representations falsely led the reasonable consumer to believe that the product was graded as prime by the USDA. They asserted that these practices violated Florida's Deceptive and Unfair Practices Act (FDUTPA).

Judge Paul C. Huck ruled that plaintiffs' FDUTPA claim failed because a reasonable consumer knowledgeable enough about USDA grading to pick up on the use of the word "Prime" in the advertising would also be knowledgeable enough about USDA grading to notice that the pork product did not contain the term "USDA." A reasonable consumer would further know that the agency does not designate pork as "prime" in the same way it does beef. Plaintiff's allegations that Tyson created a "false impression" that the product was USDA graded were not enough to allege plausible claims, wrote the judge.

While dismissing the case for failure to state a claim under FDUTPA and for unjust enrichment based on the "reasonable consumer" analysis, Judge Huck also examined Tyson and Fresh Market's argument that the USDA's approval of the name "Chairman's Reserve Prime Pork" preempted the claims. The judge found that argument unpersuasive because defendants had only established that the USDA approved the name of the product, not the marketing materials.

Key Takeaways

It stands to reason that "reasonable" consumers can't be both ignorant and knowledgeable. According to Judge Huck, if consumers claim knowledge of labeling regulations, then consumers can't claim partial knowledge of those regulations. Further, merely alleging that defendants created a "false impression" that the product was USDA graded may not be enough to claim that a reasonable consumer would be misled by the advertising in question.

Back to Reality: TINA.org Tackles Virtual Influencers in Comment on FTC Enforcement Guides

We may all be operating virtually these days, but some think it still matters whether those we interact with or follow are themselves flesh and blood. According to advertising watchdog Truth In Advertising's (TINA) request to the Federal Trade Commission (FTC), it's time to address the use of "virtual influencers." The FTC is currently reviewing its Guides to the Use of Endorsements and Testimonials in Advertising (Endorsement Guides), and TINA wants to makes sure the agency directly addresses virtual influencers in any updates it might publish.

In a comment to the FTC suggesting revisions to the Endorsement Guides, TINA made its case that the increasing use of virtual influencers, fictional but often realistic avatars who promote products just like human influencers, demands attention by the FTC. The Endorsement Guides "provide guidance to businesses and others to ensure that advertising using endorsements or testimonials abide by the requirements of the FTC Act." They address deceptive influencer marketing (generally requiring testimonials be "truthful" and representative, and that the influencer disclose all "material" connections to the Advertiser, however small), and TINA urges that failure to disclose the influencer's humanity, or lack thereof, is deceptive.

Some of the issues with virtual influencers that TINA asked the FTC to address include:

  • Amending the definition of influencer to include virtual influencers;
  • Clarifying that virtual influencers are subject to disclosure requirements when there's a material connection to advertisers;
  • Preventing virtual endorsers from circumventing the Guides' requirement that influencers include specific disclosures reflecting honest opinions based on "bona fide" product use, since virtual influencers can't have real opinions; and
  • Requiring virtual influencers to disclose that they are virtual.

The Endorsement Guides don't currently provide any guidance for advertisers on virtual influencers, which did not exist when the Guides were first promulgated in 1980, or even when most recently amended in 2009, said TINA.

TINA also stated that the Enforcement Guides had not been effective at curbing problematic social media influencer marketing generally, citing its own frequent investigations into influencer campaigns that failed to meet the Guides' standards. To strengthen the Guides, TINA also recommended other amendments, including:

  • Tackling short-term content such as stories on social media by addressing advertiser obligations to abide by the law even when posting temporary content;
  • Providing guidance to advertisers targeting minors when traditional disclosures—such as disclosing material connections—don't effectively protect younger viewers;
  • Actively pursuing enforcement action against fake accounts;
  • Updating the Guides by providing detailed information about the substance of required disclosures with other relevant FTC documentation and requiring stricter substantiation requirements by putting the onus for compliance on advertisers;
  • Directly addressing disclosure requirements for posters of paid reviews; and
  • "Rigorously" enforcing the Guides.

Key Takeaways

As "traditional" media spend continues to decline, the importance of influencer marketing only continues to grow and evolve, creating ever-new challenges for enforcement. Groups like TINA will continue to press for FTC guidance and periodically published FAQ's to adapt to address these new real (and virtual) challenges.

Google Ad Anything But Squeaky Clean, Says Plaintiff in Pine-Sol Ad Class Action, Seemingly Ignoring Application of Section 230 of the CDA

Ads for Pine-Sol published on Google Shopping falsely advertised the germ-killing efficacy of the disinfectants, claims a plaintiff in a proposed false advertising class action suit filed in the U.S. District Court of Massachusetts, targeting the tech giant and its parent company Alphabet, Inc.

Plaintiff Judith Golditch's complaint alleges that Google published an ad on its Google Shopping site for Pine-Sol Multi Surface Cleaner that falsely promoted that it would kill "99.9% of germs at home and at work." Plaintiff asserts that she purchased the cleaner utilizing a link found on Google's site that linked to an Instacart website. Highlighting the concerns surrounding the current pandemic and COVID-19, Plaintiff asserts she purchased the cleaner in reliance on the representations in the ad and was "led to believe that the proper use of the Product will prevent" diseases such as influenza, Ebola and norovirus. She asserts that these practices constituted untrue and misleading advertising in violation of Massachusetts state law and common law unjust enrichment.

Plaintiff alleges that in reality, the products do not kill germs as advertised, that no reliable studies support the ad's claims that the product kills 99.9% of germs, and that she does not know of any evidence proving the claims in the ad. Plaintiff alleges the misrepresentations give Google a "competitive edge" over competing products not advertising the near complete germ-killing power of their cleaning products and enable the product to sell at a premium price.

"The Defendants' marketing of the Product with the Representations is designed to – and did – to the knowledge of Defendants, deceive, mislead and defraud consumers and others that purchased the Product on the Google Website," continues plaintiff. She seeks damages, fees and costs for herself and a class of consumers who purchased the product since June 2017.

While including a link to the Google Shopping page where the product was advertised showing the product could be purchased from third-party sites, the Complaint does not name these third parties or the manufacturer of the product itself. This seemingly ignores Google's general stance that its Shopping ads are created based on material submitted by advertisers, presumptively providing a defense under Section 230 of the Communications Decency Act, which protects online companies from liability for content published by third parties on their platforms.

Key Takeaways

It is unclear what, if any, impact the recent executive order signed by President Trump shortly before this suit was filed asking the Department of Justice to draft a bill repealing Section 230 of the CDA will have. Perhaps it will embolden more plaintiffs such as this one to seek to target the advertising forum and not the advertiser in their suits. This case may further test whether and to what extent retailers generally are liable for the "claims" made for the products sold in their stores.

SCOTUS Grants Cert on Definition of "Automatic Telephone Dialing System" Under the Telephone Consumer Protection Act

This order—and the Supreme Court's eventual decision on the merits—may largely or entirely eliminate the viability of Telephone Consumer Protection Act (TCPA) class actions involving claims that unauthorized calls from an "automatic telephone dialing system" were placed to mobile phones, without consent. The United States Supreme Court has granted certiorari in response to a Facebook petition that seeks to resolve the growing circuit split in the definition of an "automatic telephone dialing system" (ATDS) under the TCPA. Specifically, the court took up this question: "Whether the definition of ATDS in the TCPA encompasses any device that can 'store' and 'automatically dial' telephone numbers, even if the device does not 'us[e] a random or sequential number generator.'"

The 7th, 11th, and 3rd Circuits have held that a device must use a random or sequential number generator to be an ATDS under the TCPA, which effectively excludes most if not all modern automated dialing platforms. See Gadelhak v. AT&T Servs., Inc., 950 F.3d 458 (7th Cir. 2020); Glasser v. Hilton Grand Vacations Co., 948 F.3d 1301 (11th Cir. 2020); Dominguez v. Yahoo, Inc., 894 F.3d 116 (3d Cir. 2018). In contrast the 2nd and 9th Circuits have held that a device that can store a list of numbers and automatically dial them is an ATDS, regardless of whether it has random or sequential number generation capacity. See Duran v. La Boom Disco, Inc., 955 F.3d 279 (2d Cir. 2020); Marks v. Crunch San Diego, 904 F.3d 1041 (9th Cir. 2018).

This may be a basis to seek to stay any pending TCPA class actions in which plaintiffs allege use of an ATDS in violation of the TCPA and will hopefully bring greater clarity to an unresolved area of law.

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