AD-ttorneys@law – February 8, 2019

Alerts / February 8, 2019

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Adhesive Company Hopes Made-in-USA Ruling Won’t Stick

J-B Weld to seek appeal of NAD’s discontinuation recommendation

Guilt Trip

If you’ve ever used glue from your desk drawer to fix a broken bowl or Hummel figurine, only to watch the mended object come apart under the slightest pressure, you clearly didn’t visit the J-B Weld website first.

These people are attached to glue (sorry about that).

Or, to be precise, these people are really, really into epoxies and silicone sealants. They have an adhesive solution for almost everything that’s coming apart, including rotten wood (how does that even work?).

Lies That Bind?

Recently, one of J-B Weld’s competitors took aim at this haven for adhesive fanatics over its advertising claims. Illinois Tool Works (ITW) is a sprawling Fortune 500 manufacturer that produces everything from … Well, never mind. It just produces everything (go check out the list of its subsidiaries here). ITW manufactures its own set of adhesive products that compete with J-B Weld’s. ITW took exception to J-B Weld’s claims on its packaging and online that its products have “always been made in the USA.”

As many rivals do, ITW headed for the National Advertising Division (NAD).

Homeland Harmony

The NAD, in its own words, “attempts to harmonize its efforts with those of the regulatory world.” In this case, harmony demands contemplation of that inimitable phrase wielded by the Federal Trade Commission (FTC) in “made in the USA” disputes: “all or virtually all.”

You can get a primer here, but for now let’s just crib the FTC’s own explanation: “‘All or virtually all’ means that all significant parts and processing that go into the product must be of U.S. origin. That is, the product should contain no – or negligible – foreign content.

So, did the challenge stick? (Again, sorry.)

The Takeaway

The issue raised by ITW involves the sourcing of the “tubes, caps [and] syringes” used by J-B Weld to contain its sticky elixirs (not, we assume, the standard cardboard and plastic blister packaging that holds the tubes of glue themselves).

The NAD wrote that “the FTC’s guidance is silent on the question of whether the specific components at issue … should be considered part of the product’s packaging or part of the product itself.”

Given that silence, the NAD’s conclusions are interesting.

First, it found that consumers would likely believe that the made-in-the-USA claims on the J-B Weld packages would extend to the tubes and other containers that delivered the product.

Moreover – manufacturers, take note – the NAD held that the tubes, caps and syringes were integral to the value of the product, and were not merely a device to deliver the goods. “These components are integral to the consumer’s ability to use the products properly,” the NAD wrote, “to prevent the glue from drying out between uses, [to] allow precise application of the product, [to] prevent different constituents from mixing prior to application, and [for] other purposes.” Therefore, their point of manufacture was worth investigating.

Another interesting tidbit: When J-B Weld answered the inquiry, it provided the NAD with consumer price breakdowns for its various products and did not provide its manufacturing costs. The point seems to have been to differentiate the pricing of the actual adhesive goop from the suspect tubing that housed it. The NAD rejected this approach, noting that the FTC’s Enforcement Policy Statement (which explains compliance with the “all or virtually all” standard) considers the breakdown of a product’s U.S. manufacturing costs, and not the final price paid by the customer. Because J-B Weld didn’t provide any information on manufacturing costs, the NAD found that it failed to support its made-in-the-USA claims.

The NAD ruled that J-B Weld should discontinue its made-in-the-USA claims. J-B Weld declined to do so and is advancing its defense to the National Advertising Review Board.

Stay glued to this newsletter for more developments (OK, no more – we promise).

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California Northern District to AMD: Work That Core!

Court gives green light to class action over computer processor structure

Core v. Module

In the end, as it so often does, the case comes down to semantics.

A consumer class action launched in 2015 alleges that Advanced Micro Devices (AMD) misrepresented the number of core processors in its line of “Bulldozer” CPUs.

First, a quick and dirty definition: A core processor is an independent processing unit within a computer’s CPU. Each core processor can independently execute user commands; the expectation is that several independent processors splitting commands between them will execute all of them faster than a single processor would.

The case, filed in California’s Northern District, alleges that AMD plays fast and loose with its definition of “core.” AMD, the original suit claims, “built the Bulldozer processors by stripping away components from two cores and combining what was left to make a single ‘module.’ But by removing certain components of two cores to make one module, they no longer work independently.”

We can’t claim to understand the interactions between two former cores that are smashed together into a new module, but let’s just say the plaintiffs allege that these cores share enough internal plumbing that they are not as effective as truly independent cores.

The plaintiffs allege violations of California’s Consumer Legal Remedies Act, Unfair Competition Law and False Advertising Law as well as fraud in the inducement, breach of express warranty and negligent misrepresentation – the slate that survived after two amended complaints hammered out between 2016 and 2018.

The Takeaway

AMD moved to oppose class certification in April 2018. The company argued that the plaintiffs failed to meet the commonality requirement for class certification. “The evidence is overwhelming that there is no specific, uniform expectation of what components a ‘core’ must provide, and most consumers surveyed understood core in a way that is entirely consistent with AMD’s chips,” AMD maintained.

The Northern District rejected AMD’s argument, holding that “[t]he central question raised is whether a reasonable consumer would have been deceived by the term ‘core’ as used in Defendant’s advertising. Whether or not Plaintiffs prevail on the merits of their challenge, the answer to that question is common to all class members.”

And so, this action moves forward to trial. The situation for AMD is a difficult one: settle and rejigger its “core” definition or go to trial and let a jury determine how its technology will need to be marketed.

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Class Action Over Sprouted Cereal Finds Fertile Soil

Lack of regulatory definitions

Sprout Doubt

Speaking only for ourselves, we’ve downed sprouted-grain sandwiches or made our way through a sprout-based salad at the behest of a health-conscious friend, relative or significant other. Fine. But we didn’t think about it too much. Sprouts. They seem fresh, healthy and so on. Right?

But like pretty much any topic nowadays, there’s controversy about sprouts – especially about what makes them healthy.

Sprouted grains are grains that are allowed to begin to grow into the early stages of their plant form through exposure to warmth and water. So far, so good.

The question about their health benefits – basically, the increase in valuable nutrients, such as quality proteins, crude fiber and essential fatty acids, that germination elicits – centers on not only the nutritional value of sprouts, but also how processing may affect those benefits. Some consumers prefer fresh, wet mash of sprouted grains; others believe that processed foods such as cereals and breads made with dried, ground sprouts also provide health benefits.

The Takeaway

This debate itself is fresh enough that it hasn’t been served up in the courtroom. Until now.

Consumer Ronnie Elliot filed a case in the Eastern District of New York against Food for Life Baking, accusing the company, which makes Ezekiel 4:9 brand sprouted grain cereals, of misleading customers with its packaging.

The Ezekiel 4:9 box describes sprouts as “living food” and lionizes the nutritional gains provided by using sprouts (rather than conventional grain, presumably) in the product. And there’s the rub: Does processed sprout food retain the benefits of fresh sprouts?

“This claim is misleading,” the complaint reads, “because by the time the sprouted grain is dried, grounded into flour and heated, any nutritional benefits which may have existed have been extinguished.”

Moreover, the suit goes on to point out that Ezekiel’s packaging doesn’t establish a baseline product against which to measure the improved nutrition.

This case demonstrates the risk associated with health claims, and the importance of being able to substantiate those claims, particularly when there is not a scientific consensus in the relevant field.

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Ever More TCPA Tsouris Is Brewing

FCC asks for public comment on dual-purpose telemarketing calls

“Time Cop”

Between alleged plaintiff shakedowns of text-messaging companies and grueling debates over autodialer equipment “capacity,” one has to wonder how the authors of the original Telephone Consumer Protection Act (TCPA) feel about their legacy.

The TCPA has provided fertile ground for lawsuits of considerable variety and number. And that, in turn, provokes strong opinions among consumers, businesses and regulators alike.

Do the protean creators of the TCPA cast a despairing eye over its contentious history? Are they currently planning to build a time machine to travel into the future to ensure the TCPA is clearly and usefully interpreted – only to discover that their attempts to re-engineer it have made everything worse?

Error of Emissions?

Science fiction aside, here’s the latest: The Federal Communications Commission (FCC) is throwing open the concept of “prior express written consent” for public comment. The focus of the request is a recent petition for expedited declaratory ruling by SGS North America, a company that is deeply concerned about how the concept of “dual purpose” is invoked in TCPA cases. Exactly what constitutes dual purpose is what’s at issue here, but generally it refers to a communication that is both informational and commercial.

SGS’s dilemma seems genuine. The company – “the nation’s leading provider of vehicle inspection, testing, verification and certification services,” – claims that it has been sued under the TCPA for sending texts to vehicle lessees, reminding them to schedule an inspection.

The Takeaway

Although SGS objects that it is not selling goods or services through the texts, and receives compensation only from the vehicle lessors, the class action in question claims that the texts are a dual-purpose communication that triggers prior express written consent requirements under the TCPA.

SGS maintains that this application of the TCPA runs counter to the legislation’s original intent and asks the FCC to clarify that prior express written consent is required only “when the call includes an ‘advertisement’ or constitutes ‘telemarketing’ within the four corners of the communication itself.” The petition provides a handy – albeit defendant-centric – history of the evolution of “dual-purpose” that illuminates how the concept found its way into the hands of plaintiffs.

While it seems likely that the FCC, under its (relatively) new chairman, will pinch the definition and give the defendants’ bar some oft-demanded relief, the future is always impossible to divine.

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