AD-ttorneys@law – August 1, 2019

Alerts / August 1, 2019

In This Issue

Scotch Jedi: American Whiskey Isn’t Going Down Smooth

Global whiskey association suit is inspired in part by one nerd’s work

The Way We Were

Time was, excessive enthusiasm for Star Wars, Middle Earth and other invented worlds was the demesne of the stereotypical geek ‒ someone who learned Klingon, or dressed oddly at conventions, or drank too much Mountain Dew in D&D sessions.

Alcohol, on the other hand, was for the cool kids ‒ from the jocks and cheerleaders standing around the high-school party keg to their more evolved brethren ordering cocktails over business lunches.

Then, everything changed. The movie version of The Lord of the Rings became a mega franchise; science fiction, fantasy and superhero sagas became something anyone could watch without being shoved into a locker; jocks took up World of Warcraft without hesitation; and 20 million people watched the final episode of Game of Thrones.

But just as hobbits became hip, something else was happening ‒ a transformation just as profound but perhaps less-well noted: People started geeking out over alcohol.

Sure, there have always been spirit geeks, but their circle wasn’t much larger than the community of manufacturers themselves. In the ’90s, however, beer and wine geek culture exploded into the mainstream and never looked back. Homebrewing became legal in all 50 states, Sideways was an indie sensation and the once-esoteric language of wine appreciation (“bubbly … yet civilized, with fruity overtones”) became the way beer nerds talked about beer.

Hybrid Geek

So it’s no surprise that a Frankenstein-nerd like Scotch Trooper has been assembled by our present-day culture. Scotch Trooper is the nom-de-nerd of photographer Brett Ferencz, who has made a name in whiskey-aficionado circles by staging intricate and, yes, beautiful photos of Star Wars action figures interacting with whiskey accoutrements (bottles, glasses, labels). Go check out his Instagram account; it’s all very clever and clearly the work of a pro.

Scotch Trooper’s nerdy blend of enthusiasms earned him the ultimate seal of influencer approval: the branded tie-in. The Virginia Distillery Company, an old-school distillery whose carefully crafted, wood-grain-and-sepia-toned identity is decidedly uncheeky, went out on a limb and created the “Scotch Trooper Cask” specialty product: a whiskey with “nuanced character with notes of raspberry, mocha and baking spices.” (No one can just say “smooth” anymore.)

The bottle has a Star Wars stormtrooper mask emblazoned on the side, and its name is written in “Star Wars” font.

Now, at this point, you’re probably expecting us to tell you how Scotch Trooper found himself on the business end of a trademark infringement suit. But that's not what happened.

The Takeaway

Instead, a darker, more powerful, more eerie force than any Sith Lord descended from the Caledonian mists: The Scotch Whisky Association, a mystical order that roams the galaxy defending the branding of its homeland’s most iconic export. The SWA, as it is known, was not pleased with the use of the word “Scotch” on the Scotch Trooper Cask label. Or any of the Virginia Distillery’s “false, misleading, and deceptive labelling” of its whisky products, which, according to the SWA, unfairly associate the goods with Scotland.

The federal government has stringent labeling requirements for Scotch, which the SWA invoked in the suit it filed in Delaware federal court back in early July. In the words of the complaint: “The Code of Federal Regulations provide that the words ‘Scotch’, ‘Scots’, ‘Highland’ or ‘Highlands’ and similar words connoting, indicating or commonly associated with Scotland, shall not be used to designate any product not wholly produced in Scotland.”

The problem, the SWA maintains, is that the Virginia Distillery product line is “comprised of unknown percentages of various whiskies that are mixed together with the resulting product further aged in Virginia for a period of up to one year.”

The Scotch Whisky Association is suing the Virginia Distillery Company for unfair competition and false advertising under the Lanham Act, deceptive trade practices under Delaware law, and common law unfair competition.

We’ll let you know what develops. But first ‒ if you don’t mind ‒ we’re going to kick back our recliner, crack a Schlitz and watch Labyrinth.

Oatly ‘No Sugar’ Label Claims Turn Sour

Bonus: NAD skirts against self-imposed limits on mandated nutrition claims

Undiscovered Country

Oat milk and its cousins (soy milk, almond milk and so on) are relatively late entrants to the American refrigerator, but they’re making a big splash. As we mentioned in an earlier column, alt-milks are a burgeoning industry, worth $1.6 billion by one recent measure and gobbling up 15% of the milk market.

All of this novelty generates dispute and conflict, of course; the FDA has been hemming and hawing over the terminological guidelines regarding plant-based milks for decades now, and recent litigation reflects the novelty of legal distinctions regarding plant-milk ingredients, additives and health claims. More litigation is sure to come.

So, without further ado, here’s the latest dispatch from the milk wars.

Sugar (Bum) Rush

It’s a case that sits smack in the middle of a Venn diagram of three gray areas ‒ the surprisingly blurry territory between advertising and government-mandated disclosure, the intersection of disputes over what makes milk, and the murky no-man’s land of “added sugar” regulation.

Campbell Soup Company, which owns Pacific Foods of Oregon (“plant-based beverages, soup, broth, bone broth”), brought a dispute against Oatly Inc. before the National Advertising Division regarding claims Oatly was making about the sugar content of its products.

Oatly was doing some bragging, for sure. The packaging claims in question included “No added sugar(s),” “We don’t add sugar (We thought it was worth repeating),” “Includes 0g Added Sugars” and “Sugar-Free.”

The beef about the oats? These claims were misleading, Campbell claimed, because the process that turns oats into oat milk creates sugars as the oats are torn down into smaller chunks. Oatly countered that it was only following orders ‒ nascent regulations from the Food and Drug Administration issued in May 2018, no less, whose added sugars rules go into effect next year.

The Takeaway

NAD countered that it “did not conclude that claims about added sugars are ‘mandated or expressly approved by federal law or regulation’ such that NAD would be deprived of jurisdiction,” because of abiding uncertainty regarding the definition of what added sugars were.

Nonetheless the Nutrition Facts Panel itself, on which the tag lines were built, “is not advertising as defined by ASRC Procedures, and is therefore outside the scope of NAD review.”

So, where did NAD come down? You must admire the way NAD picked its way through this dispute:

“When the advertiser chooses to use the Nutrition Facts Panel as advertising [our emphasis], the consumer takeaway from the claims about ‘added sugars’ must be considered.” Freed from taking a position on whether Oatly’s nutrition info was up to FDA snuff, NAD recommended that “Oatly not re-post or restate the ‘added sugars’ line of the Nutrition Facts Panel in its advertising …” Since Oatly claimed it had already abandoned the “no added sugar” tags, NAD did not rule on the merits of the claim.

Marketing types, take note: Quoting mandated nutrition facts doesn’t spare you standard advertising scrutiny.

Does a Teaspoon of Sugar Help the Fiber Go Down?

Post Foods accused of hiding added sugar danger with distracting health benefit claims

Not So Sweet

“Before they met Plaintiffs’ counsel, named Plaintiffs Debbie Krommenhock and Stephen Hadley were part of the 90% of U.S. consumers who buy cereal,” reads the acerbic motion for summary judgment filed by Post Foods Inc. before California’s Northern District in late June. “But then they saw a Craigslist ad dangling the possibility of making money by suing cereal companies, and through conversations with Plaintiffs’ counsel, they changed their minds. They stopped buying cereal and now profess to believe that added sugar is unhealthy ‒ although they still eat other foods with it.”

Yikes, as the kids say.

Endless Complaining

The motion is the latest salvo in a rather involved class action that began in September 2016 and eventually encompassed two amended complaints ‒ one filed later that year and another in September 2017. The latest complaint makes a broad claim: Because excessive consumption of sugar is highly toxic to the human body, Post Foods’ use of health benefit claims in marketing its supposed sugar-laden cereals constitutes false advertising and unfair competition under California law.

If you like sugar, stay away from this complaint ‒ about a fifth of its 150 or so pages are dedicated to enumerating the sweetener’s alleged evil effects, from cardio disease to inflammation to obesity to liver disease. The rest is dedicated to detailed demonstrations of how Post markets the health benefits of its products, and to one central argument: That Post knows the health problems posed by sugar consumption but pushes its sugary products as healthy.

The complaint is so exhaustive the court had to break it up into two parts for filing.

The Takeaway

Unsurprisingly, Post attacks the science of the Plaintiffs’ claim, arguing that mainstream science supports its health claims even if the class’ studies do not. But this standard counterpunch is part of a larger free speech claim.

“Quite simply,” the motion states, “the Constitution prohibits Plaintiffs from using government force to suppress Post’s truthful speech. Plaintiffs may advocate their own health views. They may attempt to persuade the FDA, USDA, or other government entities to regulate added sugar. But they cannot use government coercion to bar truthful speech about the ingredients and nutritional content of cereal out of the misplaced concern that people cannot be trusted to act wisely on that information.”

The success of the motion hinges on whether the court considers the specific health claims made about ingredients besides the added sugars to be simple truth claims that stand on their own, or deceptive because they cooperate, as it were, with harmful sugars in a larger deception of consumers.

Food manufacturers should watch this case carefully!

Preppy Retailer Gets Sued Over Poorly Printed Receipt

Vineyard Vines accused of including customer expiration date on receipt

It’s a Mystery

If Tina Cohen’s allegations are to be believed, we’ve got a real headscratcher for you.

Cohen filed a lawsuit recently in the Southern District of Florida against Vineyard Vines Retail, an upscale producer of preppy casualwear (the “Vineyard” is “Martha’s Vineyard”). The accusation? That in March of this year, Vineyard printed Cohen’s American Express card expiration date, full name and credit card brand on the receipt of a purchase she made in one of its retail locations.

It’s hard to believe that this happened within the past year, given our ever-increasing concerns about personal privacy and the growing risks of identity theft. We’ve adapted to a constant watchfulness in our online transactions, but we barely think about the security of our IRL paper receipts anymore.

The Takeaway

Cohen is suing on behalf of a large class ‒ Vineyard Vines has retail locations nationwide, and the behavior has allegedly been going on for years. She’s claiming violations of the Fair and Accurate Credit Transactions Act’s amendment to the Fair Credit Reporting Act.

The FACTA amendment was signed into law more than 15 years ago and requires persons who accept debt cards or credit cards for the transaction of business to redact certain credit card information from electronically printed receipts, including all of the expiration date. The intervening years have seen enforcement measures and public information campaigns by the major credit card companies and even additional legislation to make the requirements clear, such as the Credit and Debit Card Receipt Clarification Act of 2007, which attempted to tighten the definition of noncompliance with FACTA.

So, if the accusations are true, was Vineyard Vines, which seems to be a successful, tech-savvy company, caught in some sort of time warp?

Perhaps. But if retailers have any doubt about their own practices, they need to do a thorough review of their electronically printed receipts as soon as possible. Following FACTA is an easy win.

Ninth Circuit Hears Arguments About Alleged DMV Address Disclosure

SiriusXM radio accused of poaching car-buyer address for subscription offer

Most Foul

The tragic murder of actress Rebecca Schaeffer in 1989 brought home the horrors of stalking to a shocked public. Schaeffer, a successful young actress who was pursued obsessively by her killer for three years prior to her death, was fatally shot in front of her West Hollywood home ‒ her killer had retrieved her address from records at the California Department of Motor Vehicles.

The murder, along with a spate of stalking attacks that occurred around the same time, inspired a groundswell of anti-stalking legislation. The wave started in California and spread nationwide; within three years of the first California bill’s passing in 1990, every state in the country had passed some sort of related legislation.

A related federal law, The Driver’s Privacy Protection Act, was passed in 1994; it forbade the disclosure of personal information by DMVs. This same law is currently at the center of a subscription offer lawsuit, which has made its way to the Ninth Circuit Court of Appeals.

Renewal Blues

James Andrews, a California consumer, sued digital radio giant SiriusXM in August 2017 for allegedly poaching his contact information from an auto dealership, which is required to record purchaser information from driver’s licenses. Andrews alleged that SiriusXM received his contact information from the auto dealer and began contacting him to renew a subscription that belonged to the previous owner of the car.

The suit was tossed by the Southern District of California at summary judgment, with the district court ruling that the DPPA “regulates the disclosure of personal information contained in the records of state motor vehicle departments,” and not information handed over by the licensee, even if that information was printed on an official license.

Andrews and SiriusXM have made their cases to the Ninth Circuit; the dispute is now centered on whether the DPPA is violated only when information stored at the DMV is handed over by the DMV itself. (For reasons that are sadly obvious, both parties cite Schaeffer’s murder in their briefs.)

The Takeaway

Andrews claims that “the express language of the DPPA permits liability to be based on disclosure of information from a motor vehicle record even if it was not obtained directly from the DMV”; SiriusXM maintains that “a driver’s license is not a ‘motor vehicle record’ for purposes of the DPPA.” Moreover, SiriusXM’s brief continues, “even if Andrews’ driver’s license qualified as a ‘motor vehicle record,’ SiriusXM still would not be liable. … The DPPA covers only the acquisition of information through methods that ultimately track back to the DMV’s files. But SiriusXM did not acquire Andrews’ information that way.”

SiriusXM, however, doesn’t simply contradict Andrews’ argument; it offers a warning for those who might be tempted by his vision of the DPPA. If Andrews is right, the brief argues, “the DPPA would subject an enormous swath of ordinary conduct to criminal and civil liability. Imagine you check into a hotel and hand over your driver’s license when the clerk asks for your contact information. If the hotel later mails you a survey asking about your stay, it has committed a crime, and you may sue it for $2,500.”

We don’t know how the Ninth will rule on the meaning of the DPPA in this dispute. But in any case, if your business shares customer information with third parties, you need to beware of data privacy protection laws that may apply. For instance, California has passed a paradigm-shifting consumer privacy law that goes into effect in January 2020, and Nevada recently amended its online privacy law to add a “do not sell” opt-out inspired by, but less restrictive than, the soon-to-be-implemented California law. The Nevada law is effective Oct. 1, 2019. Many other states are considering new consumer privacy legislation, some including a private right of action. To stay on top of the legislative developments, visit our U.S. Consumer Privacy Resource Center and subscribe to our privacy blogs and alerts.

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