AD-ttorneys@law – Dec. 16, 2022

Alerts / December 16, 2022

In This Issue:

20 Years Later, TTB Agrees to Revisit Alcohol Labeling

Watchdogs claim a win, but are they being set up for a wait? Again?


When last we left the doughty heroes of the Center for Science in the Public Interest, they had summoned up the gumption to sue the Treasury Department and the Alcohol and Tobacco Tax and Trade Bureau under the Administrative Procedure Act, which, according to their complaint, “requires that an agency ‘shall … conclude a matter presented to it’ ‘within a reasonable time,’ and the reviewing court ‘shall … compel agency action … unreasonably delayed.’”

The delay in this case was a doozy.

Nearly 20 years had passed since CSPI and several of its sister watchdog groups petitioned the Bureau to add labels to the alcoholic beverages that fell under its purview (read our original article, or the complaint itself, for an explanation of why certain alcoholic beverages are not regulated by the TTB). 

Here’s what they were asking for:

that labels of all alcoholic beverages regulated by TTB include: (a) the beverage’s alcohol content expressed as a percentage of volume; (b) the serving size; (c) the amount of alcohol per serving; d) number of calories per serving; (e) the ingredients (including additives) from which the beverage is made; (f) the number of standard drinks per container; and (g) the U.S. Dietary Guidelines’ advice on moderate drinking for men and women.

A straightforward request that was, effectively, ignored.

The Takeaway

Well, the lawsuit worked, and shook loose a commitment letter from the TTB. “After carefully reviewing this matter,” the Bureau wrote, “TTB is hereby granting the 2003 petition to the extent that TTB will initiate new rulemaking on the issues of nutrient content labeling, expanded alcohol content labeling, major food allergen labeling, and ingredient labeling.”

Great, right? CSPI and its co-plaintiffs seemed satisfied. But. …

Part of the TTB’s letter includes a justification of its previous stall, too detailed to quote here, which notes a 1981 case maintaining that “when an agency receives a petition for rulemaking, it ‘may either grant the petition, undertake public rule making proceedings . . . or deny the petition.’”

The italics are the TTB’s, not ours, and the whole passage is dedicated to proving that the Bureau had “adequately” responded to the 2003 letter—a response that plodded through multiple required steps that ended only recently: “Both rulemaking projects remained active for several years, but neither resulted in the issuance of a final rule, and both projects were withdrawn from the Unified Agenda of Regulatory and Deregulatory Actions (“Unified Agenda”) in 2017.”

So while the commitment appears to be a win, it also may be teeing up everyone involved for another wait. “TTB is hereby granting the 2003 petition,” the Bureau wrote, “to the extent that TTB will engage in a new rulemaking on the issues of nutrient content labeling, expanded alcohol content labeling, major food allergen labeling, and ingredient labeling.”

We’ll wait to see what sort of weight the phrase “to the extent” carries.

The only question is, how long?

Quashed Class Action Illuminates Wrinkle in Publicity Proviso

Personal information itself isn’t protected by Illinois right-to-publicity statute

Subscription Prescription

In late November, the Seventh Circuit shot down a consumer class action case brought by Peoria County, Illinois resident Elizabeth Huston in a decision that draws an interesting (and instructive) distinction between personal identity and the abstract notion of identity itself.

The original complaint, filed in the Central District of Illinois in 2021, alleged that publishing giant Hearst Communications violated the Illinois Right of Publicity Act when it offered for sale and sold “mailing lists that identified its magazine subscribers, including Huston, by name, address, ‘gender, age, ethnicity, income, political party, religion, and charitable donation history,’ among other personal attributes.” Huston’s information was included on those lists.

The Seventh Circuit quotes IRPA as stating that “[a] person may not use an individual’s identity for commercial purposes during the individual’s lifetime without having obtained previous written consent.” Huston argued that when Hearst sold the lists—indeed, when it merely held them out for sale—it violated IRPA because it did not seek her consent.

Almost Famous

“What distinguishes this case,” the court wrote in its order, “is that Huston did not allege that Hearst solicited mailing list purchasers by publicizing her information. She did not allege prospective mailing list purchasers were able to see her or any other subscribers’ information, in whole or part, prior to their purchase. She also did not allege her name was used to sell or promote the mailing lists themselves.”

Her unique identity wasn’t used as a marketing tool. Rather, her identity—along with the identities of the multitude subscribers on the list—was the product itself, and therefore not addressed by IRPA.

The court argued that the distinction was a matter of timing. “Any use or holding out must either accompany an offer to sell or precede the sale … but it cannot follow the sale,” the order maintains. “A person’s identity cannot be employed to sell a product if their identity is only revealed after the sale is completed.”

The Takeaway

But we think the order draws another, deeper distinction having to do with the value represented by the information itself.

Huston’s argument draws no distinction between the business value of the information for the ultimate purchaser and the value of the information as a marketing tool. In effect, according to the order, personal information doesn’t “sell itself”; Huston’s personal info would have to have been central to the selling of the lists for IRPA to be invoked.

It’s a fascinating case, and the order is worth a read. The takeaway? Be aware of the distinctions between personal information as a commodity and personal information as a marketing tool. 

NAD Refers Network Company to FTC Over Rebuffed Investigation

Zscaler, Inc., bucked protocol, insisting that its challenger violated NDA

Say What?!

To most ears, “zero trust” sounds like an awful marketing tag. But in the world of internet security architecture, it’s an important buzzword.

Most of us retain a rather old-fashioned network security model in our imagination: A company has its networks, which connect all of its important data, and users access that data through approved channels. Users who are working from within the network are trusted to retrieve and share information, while users (or abusers) from outside the environment are granted or denied access based on a security challenge (often just passwords). Once trust is established, the network doesn’t become suspicious of the user again.

Zero trust takes a different approach, based on a healthy embrace of paranoia: Every request that a user might make to a company’s systems and assets is considered untrustworthy and is interrogated by the network on an ad hoc basis, even if the user is working through a previously “safe” connection. You can read more about zero trust on Wikipedia, or in this handy essay from IBM.

The need for this redefined approach is clear: When there were relatively few users working from terminals and PCs, the old-fashioned model worked just fine. But with the advent of mobile technology, and with forces like the COVID pandemic moving more of our lives and work online, network users now number in the billions. Each connection that they make is a potential line of attack for bad actors.

One Platform to Secure Them All

Zscaler, Inc., claims to leverage “the largest security cloud on the planet,” technology that “anticipates, secures, and simplifies the experience of doing business for the world’s most established companies.” Zero trust architecture is a big part of its mission.

Specifically, the company developed the “Zero Trust Exchange Platform,” “the one true zero trust platform to secure all users, workloads, and devices everywhere.” Clearly Zscaler is proud of its product—although the braggadocio in the “one true” claim may provide a hint about the sort of marketing that landed the company before the National Advertising Division.

Competitor Palo Alto Networks challenged a number of claims made by Zscaler about its platform before NAD; the individual claims are not disclosed in NAD’s summary but relate to “various privacy protection attributes and benefits of its Zero Trust Exchange platform versus the technical capabilities of Prisma Access,” Palo Alto’s platform.

Although we may never know the nature of Zscaler’s claims, there’s another, more interesting aspect of this case.

Zscaler, it seems, refused to respond to NAD’s investigation because it alleged that the watchdog didn’t have “jurisdiction to consider this challenge.” Again, the specific arguments are obscure, but NAD’s response to two points may prove instructive.

The Takeaway

First, NAD notes that Zscaler claimed that Palo Alto had “tortiously interfered with a third-party confidentiality agreement.” Presumably this means that Zscaler believed that Palo Alto had presented materials to NAD that had been covered by the agreement. NAD didn’t care.

“A non-disclosure agreement between the advertiser and an entity not party to these proceedings did not protect advertising claims contained within a marketing brochure from NAD’s review,” the watchdog wrote. “For policy reasons, it is important that advertisers not use a cloak of confidentiality to hide misleading advertising.”

Secondly, the brochure itself, which is “a carefully prepared seventeen-page document with extensive design elements that suggest it was intended for broad dissemination” handed out to “multiple recipients,” fell within the parameters of NAD’s review.

Zscaler did not respond to these counterarguments. “NAD/NARB Procedures … require advertisers to state in writing at the close of the case whether they intend to comply with NAD’s recommendations or appeal NAD’s findings,” NAD maintained. Because Zscaler refused to submit a statement, “NAD referred this case to the FTC and other regulatory authorities for review and possible enforcement action.”

There are an infinite number of ways to address industry oversight—but at the end of the day, sound advertising claims backed up by credible evidence are the best way to steer clear of trouble. Broken confidentiality agreements are a novel, but ineffective, means of self-protection.

Celebs, Athletes Swept Up in FTX Bankruptcy-Related Class Action

Massive crypto failure is unleashing the hounds of law


Remember the “Cloverfield” monster? After its initial blitz on Manhattan, it revealed an additional horror: terrifying, toxic crab-spider monsterlings that dropped from its carapace and wreaked havoc on the fleeing protagonists.

Economic collapse, whether of the whole economy or of a limited sector of it, leaves a similar impression: an enormous, damage-dealing behemoth that generates hundreds of follow-on disasters in the form of litigation and regulatory investigations, which, in turn, spur more litigation … and more litigation.

The spectacular $51 billion collapse of cryptocurrency exchange FTX in early November is casting off its own set of monsters—investigations by Congress and the Southern District of New York and litigation from angry investors. And, most recently, class actions. We can expect FTX and crypto-inspired litigation to continue for quite some time.

Catching Fyre

Because it’s 2022, and because FTX hawked cryptocurrency, it was inevitable that a follow-on class action suit against the company would invoke influencers. 

Two nearly identical suits filed in Florida by an Oklahoman and a citizen of the United Kingdom are taking aim at a cadre of influencers, including athletes (Tom Brady, Udonis Haslem, David Ortiz, Stephen Curry, and the entire Golden State Warriors franchise), one model (Gisele Bundchen), and FTX founder Sam Bankman-Fried himself.

The thrust of the cases is that the influencers used their public profiles to wreak billions in damages against unsuspecting investors. “The FTX Entities needed celebrities like Defendants to continue funneling investors into the FTX Ponzi scheme,” the complaint states, “and to promote and substantially assist in the sale of the [FTX yield-bearing accounts], which are unregistered securities.”

The suits seek redress under the Florida Securities and Investor Protection Act and other statutes, and also alleges civil conspiracy.

The Takeaway

Something missing from these cases is an old chestnut of influencer-targeting class actions—namely, a failure to disclose the underlying relationship with the company advertised.

The defendants in the FTX class actions did disclose their attachment to FTX, but the plaintiffs argue that being forthcoming about merely the existence of a compensated relationship isn’t enough. “Although Defendants disclosed their partnerships with the FTX Entities,” the earlier case states, “they have never disclosed the nature, scope, and amount of compensation they personally received in exchange for the promotion of the Deceptive FTX Platform … . [T]he SEC has explained that a failure to disclose this information would be a violation of the anti-touting provisions of the federal securities laws. Moreover, none of these defendants performed any due diligence prior to marketing these FTX products to the public.”

Where will these cases go? Despite citing cases against Floyd Mayweather, DJ Khaled, and the queen-mother-of-all-influencers, Kim Kardashian, the plaintiffs may have an uphill battle.

We’ll return to these cases as they develop.

Creative Plaintiffs Firm Brings Conventional Case?

Known for breathing fire, Snack Dragon seems to be taking a nap

New Tricks

Plaintiffs attack dog Snack Dragon is expanding its repertoire.

While it normally sticks to snack-ingredient cases (see our summary from earlier in the year), it occasionally branches out into other sectors and products, like charcoal briquettes and teas. But it’s approach is generally uniform—seeking to exploit the difference between supposed consumer expectations for premium ingredients and lack of the same in the final product. It’s the firm’s signature template.

That’s why its recent class action against Northeastern mega-supermarket chain Stop & Shop, while taking a different approach, is just a little bit basic.

A Painful Falling Out

Stop & Shop “markets, labels and sells adhesive lidocaine patches under the CareOne brand,” according to the class action, which was filed in New York’s Southern District in November. The plaintiff, Rockland County, New York’s Edward Fuller, claims that he purchased the patches on several occasions, and they failed to deliver, mostly because once applied, they fell off his body before their promised eight-hour relief materialized.

“A 2021 peer-reviewed study in the Journal of Pain Research found that approximately half of lidocaine patches promising adhesion for eight hours failed to completely adhere to the participant’s skin for the entire time,” the complaint states. “Consumers expect that when they are told the Product will provide ‘Up to 8 Hours’ of relief, the patches will adhere to their bodies for no less than eight hours or even longer. However, the Product cannot adhere to the skin for more than four hours, which renders the ‘Up To 8 Hours’ misleading, a significant disparity.”

There’re a few other allegations within: That the product’s “maximum strength” claims were false because there are other patch products that offer a higher concentration of lidocaine. That claims that the product “desensitized” aggravated nerves were false because “the FDA determined that statements about desensitizing nerves and numbing pain were misleading in the context of transdermal patch delivery systems.” And that the use of an “Rx” symbol on the package would lead consumers to believe that the product was prescription strength.

The Takeaway

But that’s it. The suit alleges “false, misleading and deceptive representations and omissions” by Stop & Shop under New York State law as well as fraud and unjust enrichment.

We’re not sure what prompted the Dragon to go off script—it seems almost addicted to a certain type of case, and this one is, again, something more basic. Perhaps Fuller’s allegations were tempting, low-hanging fruit.

So don’t be lulled into a false sense of security. The basics still matter.

Check Out Our Latest Blog Posts

17th Public Commission Meeting – The FTC is Finally Seeing Green?

Nothing says Holiday Season like the final public Federal Trade Commission meeting of the very long year. The lights are hung, joy is sort of in the air and we turn to our four commissioners for even more holiday cheer. Well actually, this week there were just three – Commissioner Wilson was not in attendance today. We, of course, would never miss joining today’s (or any other month’s) festivities, lest to let down our dear readers who rely on us to report on all the tea events.

Now Is Really the Time to Pay Attention to Dark Patterns – Seriously

For months now we have been talking about dark patterns and all the regulatory chatter associated with them. Many, including us, have been wondering whether it would end up being much ado about nothing, with dark patterns just being a new name for practices such as bait and switch that have long been considered unlawful. But, we warned, dark patterns had the potential to dramatically reshape how we look at marketing and blur if not obliterate the lines between clever marketing and unlawful marketing. For anyone who thought we were simply engaging in a theoretical law school exercise and likely crying wolf, developments over the past few months suggest that dark patterns are more likely to end up in the latter rather than the former category.

Baker & Hostetler LLP publications are intended to inform our clients and other friends of the firm about current legal developments of general interest. They should not be construed as legal advice, and readers should not act upon the information contained in these publications without professional counsel. The hiring of a lawyer is an important decision that should not be based solely upon advertisements. Before you decide, ask us to send you written information about our qualifications and experience.